Why J.C. Penney's Latest Initiative Still Isn't Good Enough

J.C. Penney just announced it will close 33 underperforming stores. Will it be enough?

Jan 16, 2014 at 7:05PM

J.C. Penney Stock

Source: J.C. Penney.

Heads-up, J.C. Penney (NYSE:JCP) investors, because your company just announced what it's calling a "strategic initiative to advance [its] turnaround."

So why was J.C. Penney stock down more than 5% this morning?

Well, the strategic initiative simply involves closing the doors of 33 underperforming stores -- and, with them, cutting about 2,000 jobs -- so J.C. Penney can "focus its resources on the Company's highest potential growth opportunities." The end result, J.C. Penney said, will be annual cost savings of roughly $65 million beginning this year -- that is, after it's done absorbing a total of roughly $43 million in pre-tax charges to facilitate the closings.

Meanwhile, the department store chain assured investors it's still continuing with plans to open one new store later this year in Brooklyn.

To his credit, CEO Myron Ullman said in a press release that the closings were a difficult decision to make, but insisted, "As we continue to progress toward long-term profitable growth, it is necessary to reexamine the financial performance of our store portfolio and adjust our national footprint accordingly."

Here's why it may not help
That seems fair enough, but remember we're still only talking about roughly 3% of J.C. Penney's 1,100-store base.

This is the bottom 3%, which means these stores' share of J.C. Penney's broader underperformance is likely disproportionate. Even so, today's "strategic initiative" was also notably devoid of any useful information regarding just how well J.C. Penney's turnaround is actually progressing, leaving already wary investors to fear the worst.

After all, just last week J.C. Penney stock plunged after the company issued a brief, vague press release that simply reiterated its existing guidance, while at the same time asserting it was "pleased with its performance for the holiday period." That guidance, however, didn't exactly set a high bar in calling for comparable-store sales and gross margin to improve both over its most recent mediocre quarter and its absolutely dismal results in the same year-ago period.

And when we remember that J.C. Penney achieved a whopping $489 million net loss in the last quarter alone, $65 million in annual cost savings seems like a drop in the bucket.

More pain ahead?
Thanks largely to a fresh cash infusion from a massive secondary stock offering in September, J.C. Penney won't be adding the dreaded "Q" after its ticker anytime in the near future.

But in the end, if J.C. Penney can't stop beating around the bush and successfully stem its losses soon, I think shareholders are in for plenty more pain.

Consider the 9 solid stocks in this free report instead
If not in J.C. Penney, then where should you put your hard-earned money to work?

One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks as a group handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

Fool contributor Steve Symington has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

A Financial Plan on an Index Card

Keeping it simple.

Aug 7, 2015 at 11:26AM

Two years ago, University of Chicago professor Harold Pollack wrote his entire financial plan on an index card.

It blew up. People loved the idea. Financial advice is often intentionally complicated. Obscurity lets advisors charge higher fees. But the most important parts are painfully simple. Here's how Pollack put it:

The card came out of chat I had regarding what I view as the financial industry's basic dilemma: The best investment advice fits on an index card. A commenter asked for the actual index card. Although I was originally speaking in metaphor, I grabbed a pen and one of my daughter's note cards, scribbled this out in maybe three minutes, snapped a picture with my iPhone, and the rest was history.

More advisors and investors caught onto the idea and started writing their own financial plans on a single index card.

I love the exercise, because it makes you think about what's important and forces you to be succinct.

So, here's my index-card financial plan:


Everything else is details. 

Something big just happened

I don't know about you, but I always pay attention when one of the best growth investors in the world gives me a stock tip. Motley Fool co-founder David Gardner (whose growth-stock newsletter was rated #1 in the world by The Wall Street Journal)* and his brother, Motley Fool CEO Tom Gardner, just revealed two brand new stock recommendations moments ago. Together, they've tripled the stock market's return over 12+ years. And while timing isn't everything, the history of Tom and David's stock picks shows that it pays to get in early on their ideas.

Click here to be among the first people to hear about David and Tom's newest stock recommendations.

*"Look Who's on Top Now" appeared in The Wall Street Journal which references Hulbert's rankings of the best performing stock picking newsletters over a 5-year period from 2008-2013.

Compare Brokers