JCP Says "Everything's OK" Despite Shares Plummeting
By Sam Lewis
Retailer’s stock at lowest level in 13 years
Things just aren’t getting any easier for JC Penney (JCP). Wednesday brought the retailer its lowest stock price, just over $10 per share, since 2000. The plunge comes just days after the company announced it would no longer offer in-store Wi-Fi across all stores, a service former CEO Ron Johnson implemented during his 17 month tenure. Ullman believes the service was rarely used by customers. Also, he felt most customers were confused by mobile checkout. Rather than impressing customers with technology, Ullman has chosen more traditional methods, like uniformed store associates, to regain the company’s popularity.
JCP is currently undergoing a strenuous effort to turn around its declining sales trend, after losing almost $1 billion last year. However, its second-quarter results indicate that the bleeding may have slowed a little. Kristen McDuffy, an analyst at Goldman Sachs, isn’t as optimistic as JCP, and believes things will continue to slide before they get better for JCP. In a report issued by Goldman Sachs, McDuffy writes, “In our view, a combination of weak fundamentals, inventory rebuilding, and an underperforming home department will likely challenge J.C. Penney's' liquidity levels in the third quarter.” She continues, “In order to safeguard against a potentially poor holiday season, it is likely that management will look to build a bigger liquidity buffer.”
Despite the drop in stock price, and all the negativity that comes along with it, JCP believes its turnaround efforts are, and will continue to be, effective. The company issued a statement via its investor relations website Thursday, Sept 26 saying just that. In response to inquiries, who they belong to is not addressed in the statement, the company is pleased with progress its new initiatives have gained. As proof, JCP indicated that it is starting to be able to predict how all areas are performing, with JCP.com sales trending greater than 10 percent higher than last year. The company concludes its statement with optimism, saying it believes same store sales will continue trending up in the third-quarter and into the holiday season.
In August, JCP’s largest shareholder, Bill Ackman’s Pershing Square Capital Management firm abandoned its stake in the company. The move by Ackman has been increasingly seen as a smart move, even though the firm took a huge loss on its investment. Since the firm’s departure, things have only gotten worse for JCP, and no evidence supports that claim like Wednesday’s price drop. When Ackman penned his open letter demanding changes be made within JCP he stated, “I think JC Penney is at a very critical stage in its history and its very existence is at risk.” If JCP doesn’t reverse its downward trends, and fast, Ackman may be right.