Plano, Texas-based J C Penney Company Inc (NYSE:JCP) finds itself at a critical juncture as it approaches its Nov. 10 earnings announcement. JCP stock has seen a 32% sell-off in the last month in anticipation.
The malls housing JCPenney stores are seeing fewer customers these days. Instead, they seeking items sold at a discount, in bulk, or online. Given this reality, JCP’s place in a retail world dominated by companies such as Wal-Mart Stores Inc (NYSE:WMT), Target Corporation (NYSE:TGT), Costco Wholesale Corporation (NASDAQ:COST), or Amazon.com, Inc. (NASDAQ:AMZN) remains unclear.
The company may find a way to save itself, but it’s seeming less and less likely that there’s salvation for JCP stock.
JCPenney Still Stuck in 1990s
I recently described Rite Aid Corporation (NYSE:RAD) as company lacked a raison d’être, or a reason for being. Unfortunately for holders of JCP stock, JCPenney also appears to lack any reason to exist. The company offers no merchandise, pricing, or, delivery or service offerings that stand out in the minds of customers.
Like other mall-based retailers — think Macy’s Inc (NYSE:M) or Sears Holdings Corp (NASDAQ:SHLD) — JCP is a 20th-century retailer struggling to find its place in the 21st century. As my colleague, James Brumley pointed out, “consumers don’t want to buy what JCPenney is offering — and they don’t want to buy it the way the retailer is selling it.”
The lack of desired offerings has hit JCP stock. With the shares trading below $2.50 a piece, the market capitalization well below the $1 billion mark. That is a low value for a company with more than $12 billion a year in annual sales. However, a $4.5 billion debt burden could easily devastate a company of JCP’s size. Consequently, investors have been reluctant to pick up shares. This is despite the stock trading well below book value and a 0.06 price-to-sales (PS) ratio.
As several of my InvestorPlace colleagues point out, there is a silver lining in this embattled retailer: JCPenney is not Sears. Unlike Sears, JCP fights to stay alive. Lately, they’ve waged this battle by offering deep discounts to customers.