JCP Stock Slapped Around by JCPenney Bankruptcy Chatter

by Alyssa Oursler | October 17, 2013 10:55 am

The good news: Shares of JCPenney (JCP[1]) closed around 4% higher Wednesday.

The bad news: That rebound represented less than half the losses JCP stock suffered Tuesday.

The worse news: Tuesday’s slide in JCP stock came amid chatter about the “B” word. Wall Street’s “B” word, anyway. While a company spokesperson denied it, investors in JCPenney stock were shaken by rumors that JCP had hired bankruptcy counsel[2].

In case you were waiting for yet another sign that your money can be better spent in other investments than in JCP stock, well … talk about a JCPenney bankruptcy should be it.

JCP Stock Can’t Find a Bottom

From the start of the year to mid-September, JCPenney stock slid more than 30%[3]. Any investors who thought the worst was over at that point and went bottom fishing for JCP were swiftly punished, too. In the past month alone, JCP stock has lost more than 45% of its value — including yesterday’s small pop.

Even mere rumors about a JCPenney bankruptcy should have us even more worried about what we already suspected — that there’s a good chance JCP simply won’t rebound from the damage done by Ron Johnson.

Keep this in mind:

• Sales at JCP fell 25% last year and are slated to fall another 7% this year.
• JCPenney was desperate enough for capital that it pulled off an unexpected secondary offering[4] that diluted shares and worried JCP investors.
• Even replacement CEO Mike Ullman doesn’t have the best track record. While Johnson is now the punchline for JCP stock, he was brought on board in the first place because Ullman was already failing at JCP.

JCPenney earnings are right around the corner, too — and it’s hard to predict how things will play out. JCP is slated to post a loss of $1.73 per share — almost thrice as wide as analysts expected three months ago, and just less than double the year-ago period’s loss.

Then again, JCP stock actually moved upward after its last earnings report, despite a 12% slide in net sales and same-store sales, which translated to an adjusted net loss of $2.16 per share — doubly worse than analyst expectations, and representing almost 70% of the full-year loss expected at the time.

Now that rumors of a JCPenney bankruptcy have been floated … well, you can mark it down that the November JCPenney earnings report will be scrutinized even more closely.

The bottom line for JCPenney stock remains the same: If you’re already in, use any jumps like yesterday’s to get out.

And if you’re not in … keep it that way.

As of this writing, Alyssa Oursler did not hold a position in any of the aforementioned securities.

Source URL: https://investorplace.com/2013/10/jcp-jcpenney-bankruptcy/

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