The price of J.C. Penney Co. Inc. (NYSE: JCP) shares has dropped to $1. It was a penny stock a few months ago. It looks like it will become one again.
J.C. Penney’s bad news has become relentless. Comparable store sales dropped 7.5% in the quarter that ended January 4. Returns by customers may make that number worse, although the company does not track that for investors. Management has forecast that fiscal-year sales will be down 7% to 8%.
J.C. Penney continues to be on the list of retailers that will not “make it.” A year ago, that list included retailers like Sears and Kmart. A credit to J.C. Penney’s management is that it has been on that list for several years and has not gone under. While it has cut back its store count to about 850, revenue and same-store sales show that the figure remains too large. As the company continues to shrink, another 95,000 jobs are at stake.
The stock traded below $1 a share for much of July and August, dragged lower by poor earnings. They recovered somewhat, but have collapsed again. Investors who put $1 into the stock five years ago have only $0.14 left.
J.C. Penney’s shares are also weighed down by JCPenney.com. There is virtually no chance it can effectively compete with larger e-commerce businesses, particularly Amazon, Walmart and Target. It also has to contend with competition from midsized retailers. J.C. Penney cannot elbow its way into a part of the industry that is not just crowded, but cutthroat. These sites are the public face of the huge discounts many retailers offer.
JCPenney.com offers a number of items for 60% off. There are more at 50% and 40% off. The company may make money on some of these items. It is hard to believe it makes money on them all. Maybe J.C. Penney needs the cash flow. Maybe it has too much inventory for these products. Maybe they are loss leaders, meant to get people to shop for more things on the site. None of these things is good.
2020 may be the year J.C. Penney goes under. Its share price indicates much of Wall Street thinks so. However, it has lived through periods just as bad. The stock may be at $1, and probably will dip below that, but J.C. Penney continues to hang on.
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