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Why Shares of J.C. Penney Declined Over 10% Tuesday Morning

By Daniel Miller – Sep 17, 2019 at 1:32PM

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While the company has taken positive steps for its business, J.C. Penney faces a tough turnaround.

What happened

Shares of J.C. Penney Company (JCPN.Q), a department-store and online retailer of apparel, footwear, accessories, and home furnishings, among other products, declined more than 10% early Tuesday morning as the company tries to turn its business around before permanently closing its doors.

So what

It's been a consistent downward spiral for JCP investors: The company's stock has shed 54% of its value over the past year and over 91% over the past three years. The growth in e-commerce and rapidly changing retail landscape has forced many retailers to permanently close their doors. Former rockstar brick-and-mortar retailers such as Sears and Toys R Us, to name a couple, couldn't adapt before filing for bankruptcy. JCP is burning through cash, has a hefty debt load, and received a notice in August that its stock could be delisted from the NYSE after trading below $1 per share for 30 consecutive days. Several company executives have bought back JCP shares since then. With a market cap hovering around $280 million, investors will have to take daily swings in stock price with a grain of salt, as it can swing with no direct news or on broader industry news.

Apparel retail store

Image source: Getty Images.

"While we still have work to do on our topline, I strongly believe that growing sales in an unprofitable way is simply not an option. The only way I know how to reconstruct a business, is through a holistic approach across all the key tenets of strategic, purposeful and effective retailing." said Jill Soltau, CEO of J.C. Penney, in its second-quarter 2019 earnings release.

Now what

Despite the doom and gloom surrounding JCP, the company is still trying to reinvent itself. Last month, management announced that 30 stores would offer secondhand women's clothing and handbags from thredUP -- if you aren't aware, thredUP is the world's largest online consignment store offering leading designers and brands. JCPenney also recently introduced St. John's Bay Outdoor, a lifestyle apparel brand for men "rooted in rugged tradition," in roughly 600 JCPenney stores as well as online.

At the end of the day, despite taking positive steps to turn around its business, JCP is far less relevant in the retail world than it was a decade ago -- and with a cash and cash equivalents pile of $175 million and over $2 billion in debt maturing by 2023, it has a difficult path ahead.

Daniel Miller has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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