The stock market is having a really strong Wednesday, with all major indices gaining significant ground behind a few strong earnings reports. One of the stocks left out of today’s rally, however, is struggling department store JCPenney (NYSE:JCP).

JCP reported miserable second-quarter numbers, missing estimates across the board. It also slashed full-year guide. JCP stock dropped 25% in response to the awful numbers.

You know who else is having a bad day despite broader market strength? Sears (NASDAQ:SHLD). That struggling department store is down 7% as of this writing, likely in sympathy with weak numbers from JCP.

Why are investors lumping JCP and Sears together? Because both are struggling department stores with bleak outlooks, dying brands and troubled balance sheets. At this point in time, it is perfectly legitimate to wonder whether these companies will even be around in a year.

Could they actually go under? And if so, who will head out the door first? JCP or Sears?

In all likelihood, both go under quite soon, and if I had to pick one to go first, I’d say JCP.

Why Both JCP and Sears Are Doomed

JCP and Sears are both doomed because the retail space cannot accommodate them anymore.

There are two ways of looking at this.

The first way is that Amazon (NASDAQ:AMZN) has gone from $15 billion in sales a decade ago to nearly $180 billion last year. The retail market isn’t growing at a 25%-plus clip, so Amazon can’t do that ramp unless other retailers cede market share.

However, Walmart (NYSE:WMT), Target (NYSE:TGT), Nordstrom (NYSE:JWN) and others have actually substantially grown revenues over the past decade. That means that somewhere else in the retail world, somebody is losing a ton of market share.

JCP and Sears fall into the category of those retailers losing a ton of market share. Meanwhile, Amazon’s growth remains robust, Walmart and Target are growing at their best rates in several years, and Nordstrom is turning a corner toward bigger growth ahead. All together, that means that JCP and Sears will simply continue to lose market share and relevance.

The other way of looking at the JCP-Sears demise is that when some retail sales went online, the brick-and-mortar retail world shrunk. Most retailers adapted, and shrunk their physical presence while boosting their digital presence. But, JCP and Sears didn’t do that. Instead, they kept these massive brick-and-mortar footprints that, quite simply, weren’t supported by a smaller overall brick-and-mortar market.

Thus, when the brick-and-mortar retail market continued to shrink, both companies were squeezed out. This squeezing hasn’t stopped, and JCP and Sears haven’t equipped themselves to compete against the now tech-savvy Walmart’s and Target’s of the world.

Big picture, no matter which way you look at it, JCP and Sears are doomed.

Why JCP Could Go Under First

The traditional school of thought is that of all the retail names, Sears was the most likely to go under. JCP wasn’t even being thrown in the potential bankruptcy discussion until recently.

Recent results, however, underscore that JCP may actually be even more troubled than Sears.

Sears has about $470 million in cash on its balance sheet against $3.4 billion in debt, implying a net debt position of just under $3 billion. That is actually much smaller than JCP’s net debt position of just over $3.8 billion (less than $200 million in cash and $4 billion in total debt).

Granted, Sears is burning through more cash (negative operating cash flow of $1 billion last quarter versus negative $135 million for JCP through the first six months of 2018). However, Sears is really rationalizing its store base and cutting capex, providing less stress on free cash than at JCP, where the store base isn’t getting cut at the same rate and capex is still big.

Because of this, I actually think that Sears, which has been under the bankruptcy microscope for a while, is taking the right steps to avoid going under. JCP, though, hasn’t been under that same microscope, and as such, could be in more trouble.

Bottom Line on JCP Stock

Both JCP and Sears are doomed. I wouldn’t touch either stock with a ten-foot pole. But, if we are picking favorites, I think Sears actually has a longer runway ahead than JCP.

As of this writing, Luke Lango was long AMZN, WMT, and TGT.