It is safe to say that J C Penney Company Inc (NYSE:JCP), along with the rest of the department store sector, has had a tough run. Once a darling of ever-expanding American commerce, JCP stock once traded north of $80. But that was more than a decade ago. Today, JCP stock trades under $4.

Usually, stocks that trade in the $2 to $5 range are what investors consider of the garbage variety. Stocks don’t IPO at that level, so if a stock is trading that far down, it means Mr. Market has purposefully beaten the stock down to that level. They are stocks with broken narratives and bleak growth outlooks.

JCP is nothing different. The growth narrative of a discount department store forever winning the hearts of American consumers is broken. The growth outlook for a brick-and-mortar retail giant with a ton of debt and not much free cash flow is about as bleak as possible.

So should you buy the lowly JCP stock? I don’t think so. I think it is more than likely this department store goes bankrupt.

JCP Is a Big Underperformer

Brick-and-mortar retail isn’t dying. It is simply shrinking. That means that while not all brick-and-mortar retailers will go under, some inevitably will as a result of industry consolidation.

In the department store sector, the one company that looks most likely to go under is JCP.

Last quarter wasn’t a bad quarter for department stores. Nordstrom, Inc. (NYSE:JWN) scored a huge comps beat, with a 1.7% improvement versus expectations for a 0.5% decline. Kohl’s Corporation (NYSE:KSS) also handily topped comps estimates, with a mere 0.4% decline. Macy’s Inc (NYSE:M) recorded a miserable 2.5% decline in comps, but that still topped estimates for a 3% decline.

JCPenney, though, was the only department store of the big four to miss comparable sales expectations. Plus, its 1.3% drop in comps was the second worst in the group.

But that’s not the only place JCPenney looked worse than its peers.

JCP’s gross margins pulled back by 200 basis points last quarter. Nordstrom reported a mere 25 basis point compression on the gross margin line, while Macy’s said gross margins fell 60 basis points and Kohl’s said gross margins were flat.

Gross margins are critical. It indicates a retailer’s ability to stabilize average selling prices in the midst of a markdown-heavy environment. Small gross margin compression implies the retailer isn’t being forced to use discounts to drive traffic, while big gross margin compression implies the retailer is resorting to such promotional tactics.

Clearly, JCP is using big discounts to drive traffic, more so than its peers. The worst news is that the promotional strategy really isn’t working all that well. Comparable sales growth was still negative last quarter.

Negative revenue growth on top of gross margin compression implies that earnings still have a long ways to go before they’ve bottomed out. That is especially troublesome for JCP because the company has well over $4 billion in debt on the balance sheet and only produced $3 million in free cash flow last year. This combination of earnings degradation, a whole bunch of debt, and not much free cash flow is potentially lethal.

Bottom Line on JCP Stock

As the brick-and-mortar retail space shrinks, certain players will be forced to disappear from the scene in order to accommodate the lower dollar flow.

In the department store world, it looks like JCP is going to be the player forced out. Not only is the company dramatically underperforming its peers where it counts, but said under performance is putting unsustainable stress on the company’s monstrous debt load.

Overall, JCP is an eyesore in a really ugly industry. Don’t be surprised to see this eyesore get pushed out sooner rather than later.

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