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Is JCPenney Doomed?

JCP needs time and money to execute a turnaround. Uh oh.

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The new VP of marketing for JCPenney (JCP) is either one of the luckiest people on the planet, or one of the unluckiest people ever known to man — there’s not much in between.

The market has widely assumed that JCP is on the verge of careening over a cliff and into a canyon, but few would deny that if for some reason the company can be salvaged (and that’s a big if), the masterminds behind that turnaround would become legends within the corporate world.

Needless to say, speculative investors are faced with a real risk-vs.-reward conundrum.

A Lost Cause?

The new marketing senior vice president is Debra Berman, a Kraft Foods (KRFT) defector with what most would consider an impressive C-level resume. At Kraft, Berman headed up the global branding strategy for all of the company’s product lines. Prior to her time with Kraft Foods, she spent time in the advertising agency world, where she cut her marketing-strategy teeth.

Were it any other company or any other time, JCP investors might have been impressed by the addition of an experienced executive — and some fresh ideas — to the organization’s management team. This time though, the market shrugged it off, knowing JCPenney is a sinking ship no matter who’s at the helm.

Or maybe the market knows that nearly a dozen top-level executives have left the company within the past few months, leaving gaping holes in what absolutely has to be a top-notch turnaround team.

That being said, even if Debra Berman has hit the ground running sprinting, there’s only so much marketing and branding magic that a newcomer can work. While she might be able to lure ex-JCPenney shoppers back into the stores, the retailer still must offer what the consumer wants.

And the word is, that part of the operation still is off the mark.

Time for a Serious Clearance Sale

It doesn’t help that vendors might be increasingly hesitant to sell goods to Penney’s.

Last week it was reported (by the New York Post) that retail lender CIT Group (CIT) had frozen credit for borrowers that supply JCPenney. JCPenney refuted the claim the next day, saying those vendors’ credit lines still intact. But, it’s still not clear that there wasn’t a basis of truth in the New York Post’s claim; it’s not like the newspaper has a history of spreading false information.

Penney also was quick to point out that only 4% of its merchandise was supplied by CIT-backed vendors. As they say, though, where there’s smoke, there’s fire. There’s little assurance that the lenders for JCPenney’s other vendors aren’t already thinking about doing what CIT was rumored to have done.

Either way, the liquidity of its suppliers might be the least of JCP’s problems.


Article printed from InvestorPlace Media, http://investorplace.com/2013/08/is-jcpenney-doomed/.

©2014 InvestorPlace Media, LLC

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