As shares fall below $1, it 'might be too late' for JC Penney to turn around

Adam Shapiro
·Anchor
Updated
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Years wasted neglecting customer wants and desires are now catching up to JC Penney (JCP).

“The new CEO, I think, is trying to do the right thing and learn, but she’s running out of time,” Kotter International Executive Vice President Kathy Gersch, told Yahoo Finance’s “On the Move.”

JC Penney closed at 85 cents a share on Monday, the first time shares fell below $1 since Oct. 10, 2019.

Last summer shares traded at a low of 53 cents, rebounding before the 30-day requirement that could have forced the NYSE to delist the retailer. Shares traded in a range between 53 cents and $1.17 for the second half of 2019.

Gersch, a former vice president at Nordstrom with more than 20 years experience in retail marketing, said JC Penney may be on its last legs. “There’s not going to be a way to generate enough cash to invest enough aggressively to turn things around unless they do some kind of leverage of their existing real estate portfolio,” as Macy’s has done.

JC Penney may just be “too late late or too slow to invest” to turn itself around, Gersch said.

Trying to save a 118-year-old retailer

JC Penney is scheduled to report fourth-quarter earnings on Feb. 27, but recently issued preliminary sales figures for the all-important 2019 holiday shopping season.

Same-store sales for the combined nine-week period ending Jan. 4, 2020, fell 7.5% compared to the year before. Penney reaffirmed its full-year outlook, expecting adjusted EBITDA to exceed $475 million for full-year fiscal 2019.

Prior to the holiday shopping season Penney issued its third-quarter earnings report and stated it had a “strong liquidity position of about $1.7 billion.” At the time new CEO Jill Soltau said, “The past quarter was an exciting and energizing time at JC Penney as we made significant progress on our efforts to return JC Penney to sustainable, profitable growth.”

Former JCPenney CEO Ron Johnson told Yahoo Finance that Soltau “is doing a lot of the things I wanted to do. I might have gone too fast.” But while Johnson acknowledged his efforts several years ago didn’t work, he warned old business models won’t save his former company.

“So going back to that tired promotional model serving an old, mature customer was probably not a great strategy,” he said.

Gersch said retailers can limp along for a long time before finally closing. She says JC Penney is late to the game to reinvent itself but not out of it. “They need to identify who their customer is and what she wants,” she said.

Adam Shapiro is co-anchor of Yahoo Finance’s ‘On the Move.’

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