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Why J.C. Penny Stock Dropped 33.5% in January

By Steve Symington - Feb 12, 2020 at 8:02AM

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Between weak holiday sales and the threat of being delisted, the department-store retailer has plenty of work to do.

What happened

Shares of J.C. Penney (JCPN.Q) declined 33.5% in January, according to data from S&P Global Market Intelligence, after the department-store chain announced disappointing holiday-season results.

So what

The bulk of J.C. Penney's drop last month came on the heels of a Jan. 9 press release in which the company disclosed that comparable-store sales fell 7.5% in the nine-week period ending Jan. 4. To be fair, J.C. Penney was quick to point out that comps would have declined a more modest 5.3% if you excluded last year's exit from major-appliance sales and in-store furniture offerings.

J.C. Penney store front with empty parking lot.

IMAGE SOURCE: J.C. PENNEY.

J.C. Penney further reaffirmed its full-year outlook for comparable-store sales to decline in the range of 7% to 8% (or 5% to 6% excluding appliances and in-store furniture). The company also reiterated its expectation for positive free cash flow in 2019, as well as for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to exceed $475 million.

Now what

Nonetheless, it's clear investors in the beleaguered retailer weren't pleased. And to make matters worse, on Jan. 31, 2020, J.C. Penney said it received notification from the New York Stock Exchange (NYSE) that it's no longer in compliance with the NYSE's continued-listing criteria. Specifically, given its plunge following the holiday-sales report, J.C. Penney is in violation of the NYSE requirement that listed companies maintain a consecutive 30-day average closing price of at least $1 per share.

Of course, investors should note J.C. Penney technically has six months from the date of the NYSE notice to regain compliance. It could do so either through natural share-price appreciation -- something that would likely require demonstrating tangible progress in its ongoing turnaround efforts -- or via a reverse stock split.

As it stands, J.C. Penney will have a chance at convincing investors it's still worthy of a place in their portfolios when it releases fourth-quarter 2019 results (and forward guidance) on February 27, 2020, as well as during its upcoming Analyst Day event on April 7, 2020.

In the meantime, given the company's weak holiday performance and fledgling share price, I think investors would do well to consider putting their money to work in any number of other promising top stocks.

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Stocks Mentioned

J. C. Penney Company, Inc. Stock Quote
J. C. Penney Company, Inc.
JCPN.Q

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