One of the most-quoted parts of the musical Spamalot is when the aged plague victim is carried out to be carted off to the boneyard, but resists.
“I’m not dead yet,” he complains, before the hauler bashes him on the head and takes him away.
That’s the position J C Penney Co. Inc. (NYSE:JCP) appears to be in. It has been pronounced dead by analysts for so long, and so loudly, that most investors assume bankruptcy is just around the corner. In fact, the company is holding its own, albeit barely, and most analysts don’t know what to say about it.
The shares did get a boost in November after beating negative guidance, eventually rising 18% and holding most of the gain into December. But the JCP stock price is still down 66% for the year.
Penney’s doesn’t want to go into the cart. But should you just bop it on the head?
Being Nice, Being Naughty
J C Penney does seem to be doing a few things right.
It launched a clothing subscription service for big and tall men and did it in conjunction with a company that knows the business, Bombfell.com. It’s a thriving niche. Stitch Fix Inc. (NASDAQ:SFIX) is worth $2.25 billion after its November IPO. That’s more than twice Penney’s market cap.
The company’s new digital ads also got rave reviews. The “J C Penney Holiday Challenge” campaign is focused on bargain hunters, and pitched the idea that the store can beat shoppers’ Christmas budgets.
The company also poked fun at its own stodgy American image with a set of “Jacques Penne” pop-up stores, with curated gifts around specific themes. Celebrities like Nichole Richie were also brought in to back the effort.
But celebrity can be a two-edged sword, as the company learned when hip-hop entrepreneur Russell Simmons, who had sold a menswear line called Argyleculture to J C Penney in 2016, was accused of sexual misconduct by two women. J C Penney quickly pulled the line from its website and 80 stores where it was being displayed.
Calls to Kill It
While acknowledging that it is trying new things, most InvestorPlace writers consider Penney’s a no-go zone.
Bret Kenwell notes a lack of financial flexibility that prevents the company from taking full advantage of omnichannel opportunities. Laura Hoy gives the company credit for trying, but notes comparable store sales rose only due to heavy discounting, and that its location in middle-class malls mean it’s not where shoppers are.
Lawrence Meyers thinks it may have found a bottom, with $93 million in earnings during that third quarter, before taxes. Aggressive speculators may like its prospects, but Meyers admits the last time he recommended the stock it was at $3.40 per share, and it promptly fell to $2.36 per share before rebounding.
J C Penney Hard to Love
My problem with J C Penney is that its image is that of a broad-based retailer in a world that demands successful retailers have niches. Middle-class stores were for shoppers who walked into a grand bazaar with some limited notion of what they might want, and often came out with something else entirely.
That’s not the way of the world anymore. People either go in with specific items — which they want good prices on — to buy or, if they’re interested in gifts, a list of recipients. The best stores make choices for people, rather than offering choices. They save time and turn that into profit.
There are indications Penney’s is trying to fit into that world… but I’m not yet certain it can.
Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned no shares in companies mentioned in this article.
