JC Penney: Will the Last Person to Leave Turn Out the Lights

By Douglas A. McIntyre Published Aug 13, 6:35AM EDT

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JC Penney: Will the Last Person to Leave Turn Out the Lights — © Mike Kalasnik / Flickr

As bidders vie to buy the J.C. Penney retail operations, and perhaps its real estate, one of its attorneys said the company is “in the red zone.” The meaning of the comment was not clear. However, it was almost certainly a hint at how close J.C. Penney is to liquidation and the end of jobs for thousands of people.

It is not certain who will buy part or all of J.C. Penney. Among those in bankruptcy court were some of its landlords, specifically Simon Property Group and Brookfield Property Partners, both of which operate malls. Even if they cut J.C. Penney’s rent essentially to zero, it will not bring back the shoppers who have deserted the retailer in greater numbers each year. J.C. Penney cannot cut its way to profits.

J.C. Penney has 850 stores, a number it plans to cut to 700. That will bring its revenue down even more since its collapse. In the quarter that ended May 2, revenue was $1.2 billion, down from $2.6 billion in the same period the year before. The spread of COVID-19 was the most substantial cause. As the disease continues to race around America, many of those stores could be closed for months. J.C. Penney cannot afford this. It has not had a solid balance sheet for years. It could not borrow money to build a cash cushion the way Macy’s has. Even the Macy’s funds may well not be enough. In the most recent quarter, J.C. Penney’s net cash used in operating activity was $814 million.

J.C. Penney has another problem new owners in the mall business cannot solve. Malls have become unattractive to many shoppers concerned with crowded indoor spaces. The will not abate until the pandemic does.
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Even if J.C. Penney were funded for another year or more, and could make it to the holiday shopping period, consumers already have moved on to Kohl’s, Macy’s, Nordstrom and a crush of other smaller retailers. Whatever merchandise and price cuts J.C. Penney offers will not be adequate either. J.C. Penney already offers discounts of as much as 50% on items available at JCPenney.com.

Amazon.com often has been blamed for the demise of department stores. That is true, and the process is not over.

The rescue of J.C. Penney is already over.
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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.