Please ensure Javascript is enabled for purposes of website accessibility

J.C. Penney Reports a Surprise Q4 Profit

By Daniel B. Kline - Feb 27, 2020 at 11:04AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The retailer still saw a big drop in comparable-store sales and its future remains dicey.

J.C. Penney (JCPN.Q) has a tiny sliver of hope.

The struggling retailer recorded a slight profit in the fourth quarter despite reporting a 7% drop in comparable-store sales. J.C. Penney had a net income of $0.08 per share and finished the year with $1.8 billion in liquidity.

The exterior of a J.C. Penney

J.C. Penney had a better-than-expected quarter. Image source: J.C. Penney.

Doing it right?

CEO Jill Soltau faces a nearly impossible task. She has to radically remake her chain's stores while also preserving cash. In Q4 she managed to cut inventory and increase profitability even though sales dropped by 7.7% to $3.38 billion, compared to $3.67 billion for the fourth quarter last year.

"I am encouraged by our progress, especially in our women's apparel businesses," she said in a press release. "We knew it would take time to restore discipline and return growth to JCPenney."

Can J.C. Penney recover?

The challenge Soltau faces is that you can't cut your way to success. J.C. Penney may have bought itself some more runway but not going out of business is not really the measure of long-term success.

Soltau needs to make massive investments in the chain's dated stores. She also needs money for inventory and to invest in her company's supply chain and digital experience.

It may be possible to make those changes slowly if the CEO can keep the ship afloat. The problem with moving slowly, however, is that the destination can change before you have even finished making your moves.

J.C. Penney remains on life support, but its CEO does deserve credit for keeping it alive and giving it at least a chance of a miracle comeback.

Daniel B. Kline 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

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

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
394%
 
S&P 500 Returns
127%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.