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.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers