JCPenney tries to right the ship

Kate Davidson Nov 20, 2013
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JCPenney tries to right the ship

Kate Davidson Nov 20, 2013
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JCPenney reports earnings today, and man, has this company been on a rollercoaster ride. Their previous CEO led them on a disastrous course, doing away with the regular discounts JCPenney customers loved, and losing billions in sales. Analysts still expect a loss today, but is the new/old JCPenney any closer to financial health?

The problem is, JCPenney was so far gone, it takes time to right the ship. Gilford Securities analyst Bernie Sosnick says the floundering Penney got stuck with a lot of unsold merchandise. So it stopped buying inventory. Then stores ran out of the basics Penney is known for.

“You couldn’t find the right size,” he says. “You couldn’t find the colors you wanted. So it took months before you could rebuild that kind of inventory.”

And then there’s cash. Burt Flickinger of the Strategic Resource Group says JCPenney has burned through a few billion dollars this year.

“Penney does not have the markdown and the merchandizing and the marketing money to compete on the big brands at deeply discounted prices the way Penney’s key competitors can,” he says.

The real test may not be today’s earnings, or even next quarter’s.

“All but zombies report a profit for the holiday season,” Sosnick says.

It’s how well JCPenney builds up its base business to get through the slack months after that.

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