3 Reasons to Sell J.C. Penney

In the following video, Fool analysts Jeremy Bowman and Isaac Pino examine the bear thesis behind J.C. Penney. CEO Ron Johnson's highly vaunted rebranding strategy has thus far mainly driven customers away. The retailer has gone cash flow-negative, and it may be undone by a crushing debt burden. What's more, the company is heavily in mall real estate that appears to be turning into an albatross in the age of online shopping.

J.C. Penney has been a train wreck whose comeback always seems just around the next earnings corner, but people are beginning to doubt if CEO Ron Johnson can weave the same magic that he did at Apple. For investors wondering whether J.C. Penney is a buy today, you're invited to claim a copy of The Motley Fool's new must-read report on the company. Learn everything you need to know about Penney's turnaround -- or lack thereof -- and as a bonus, you'll receive a full year of expert guidance and updates as key news develops. Simply click here now for instant access.

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  • Report this Comment On January 19, 2013, at 6:33 PM, AlexKalman wrote:

    This is an interesting article.

    I tend to agree.

    JCP looks like a failure.

  • Report this Comment On January 20, 2013, at 12:18 PM, joanyh wrote:

    Short answer: I went into a local JCP yesterday after reading this and I think JCP is doing better than this piece suggests. I think JCP has turned the corner IF they are going to make it. But they still have lots to do.

    Long Answer: I've been in JCP maybe six times since last year. I own just a handful of shares in case that helps you gauge where I'm coming from. The last time I was in JCP was, indeed, to use that "gift" they emailed me last fall ($10 coupon really). Last spring, summer and fall, I was unimpressed by the store. It seemed decluttered but drab and still outdated. I was disappointed that the workers were dressed so casually. I had a hard time figuring out who worked there. The few shops looked OK but the merch seemed to be limited in selection; perhaps this was because items are divided by brand or shop rather than department. So I didn't have much hope.

    After seeing this yesterday, I went to the local mall in Joiet, IL. There's a JCP, Macy's, Sears and Carson's (Bon Ton). I was surprised to see more shops in the JCP but even more surprised to see more shoppers. In fact, this JCP had obviously more shoppers than the Macy's and the Sears and about as Many as Carson's. I liked the "jcp" shop best, but I had a hard time finding the tall men's items and the selection the jcp shop, again, seemed limited. The Macy's was pretty dead...but I think that's because this is a store that Macy's is waiting to write off and close. The store was in much worse shape than most Macy's and the decor was from the 1980s. That said, maybe that's why the jcp was doing so well. It was in a mall with a shabby Macy's. That said, JCP bags dramatically outnumbered Macy's, Sears and Carson's bags.

    Speaking of decor, the decor in JCP looked fresh and hip...but it also looked a bit disposable. Black chandeliers in one shop for example that looked like they will be out of fashion in a couple of years.

    So given that Ron Johnson said it would take to 2015 to turn things around, I still think he could be well on track. Yet, I think he should have waited to phase out coupons until AFTER the shops and stores were redone.

    I also think whatever happens with the Martha Stewart case will have an impact. Sure, they can replace her name on stuff and sell the same things if they lose, but symbolically, I think it will have a huge negative impact.

    The thing is, jcp is becoming a "shop store" rather than a "department store." If I want a pair of jeans, I still have to hop between three or four shops in the men's department. Not sure if that's something I could like or just won't.

    So if this Motley Fool report was issued A YEAR FROM NOW, I'd agree. Right now, I think our esteemed "Fools" are rushing things. Thanks for your stories. I look forward to them.

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