If you need any more proof that J.C. Penney (OTC:JCPN.Q) is in big trouble, consider the executive drain underway in the C-suite. In just four months, the ailing department store chain lost its CEO, its top customer executive, and now its chief financial officer. Although it just announced it hired a new CEO to start on Oct. 15, the situation appears to be one where the business is swirling around the drain and executives are looking for a place they can land before the company gets sucked under.

The executives abandoning J.C. Penney make it difficult to see how it can survive. Despite having a well-known and well-respected brand, retail upheaval might have damaged it beyond repair.

Customer picking up an online order

Image source: J.C. Penney.

The economy's strength reveals the weakest players

J.C. Penney lost its chief executive in May when Marvin Ellison jumped to Lowe's after less than a year in the position. Two months later, Chief Customer Officer Joe McFarland followed Ellison to Lowe's. And now, a little over a year after becoming Penney's CFO at the behest of Ellison, Jeffrey Davis has left the company for the same position at Qurate Retail Group, formerly Liberty Interactive, which owns HSN, QVC, zulilly, and other retail nameplates.

When Ellison left, Penney's board created what it called an "office of the CEO" that consisted of four executives to oversee operations until it could find an executive replacement. McFarland and Davis were part of that "office." The new CEO will be on board Oct. 15.

The retailer is still struggling to come to grips with the changed retail landscape that also looks like it's going to take Sears Holdings (NASDAQ: SHLD) down with it. Yet while Sears has become an actual penny stock (trading for under a dollar) and J.C. Penney is close to becoming one, others, including Kohl's and Nordstrom, have managed to stabilize after suffering dramatic declines. As the economy has improved and consumer confidence has solidified, it has revealed which retailers are truly in a weakened state.

Walking a very fine line

Kohl's reported that comparable sales rose 5% in the second quarter, while Nordstrom's comps were 4% higher. In comparison, J.C. Penney's comps were up just 0.3%. Sears reported yet another quarter of comp losses, though there was significant improvement from the year-ago period and sequentially.

Retailers like Macy's seem to be caught between the two extremes. Although Macy's was beaten down in the aftermath of the Great Recession and looked to be on the edge of ruin, too, it bounced back strongly and appears to be in a better place financially. However, its comps were up only 0.5% last quarter, hardly the robust numbers posted by some of its rivals.

But it hasn't seen the same revolving door in its executive offices that J.C. Penney has, a problem that is being compounded by Penney's inability to find a replacement for Ellison until just this week. While Jill Soltau is a former CEO of JoAnn Fabrics and possesses a strong retail background, the retailer now also needs to find a CFO to replace Davis (the senior vice president of finance is filling in on an interim basis), and that complicates the situation. It's not easy to recruit executives to a firm that looks as if it is teetering on the edge of insolvency and J.C. Penney had to give Soltau a $6 million signing bonus, a $1.4 million base salary, and the potential to earn 300% of her base salary in bonuses for an additional $4.2 million.

J.C. Penney is now entering the important holiday selling season with some gaping holes in its leadership, leaving little room for error. Its third-quarter report will come out just ahead of the holiday, and if it posts disappointing numbers again even though consumers show they are willing to spend, the retailer might not need to worry about filling any of the other vacancies. It will be in a race to the bottom against Sears, with financial ruin at the finish line.

Editor's note: This story has been updated to correct figures for Soltau's base salary and potential bonus.

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