The Motley Fool Previous Page

J.C. Penney's Risks

Jeremy Bowman
January 8, 2013

There's little doubt that J.C. Penney (NYSE: JCP  ) was one of the market's more entertaining stocks in 2012. Unfortunately for investors, the drama surrounding the retailer has been more of the tragic variety than anything else, and a happy ending is far from guaranteed. Recently, we took a look at the opportunities that could help drive future gains for Penney's. Now, in this excerpt from our premium research report, we examine the risks facing the transitioning company.

The biggest threat to J.C. Penney is the risk that this grand brand revamp doesn't pan out. Johnson is essentially making an all-or-nothing bet. As the dramatic same-store sales drop indicates, the initial results aren't good, and that's not the only reason for concern.

Johnson's handpicked No. 2, Michael Francis, a former Target executive and head of marketing, merchandising, and product development at Penney's, left in June after just nine months on the job as the retailer's new strategy was not adequately communicated to customers. Some analysts have also suggested he was forced out by Johnson as a fall guy. Former CFO Michael Dastugue also left in January, another indication of instability in the management team.

And while the retailer claims it's offering lower prices under its "Fair and Square" model, that's not the perception customers have had, according to recent surveys. The company has yielded to criticism in some regards, by using the word "sale" once again after resisting it earlier. In many