Here's Why J. C. Penney is Down More Than 50% in 6 Months

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J. C. Penney Company, Inc . JCP has been in troubled waters for quite some time, losing customers to cheap sellers. Though it has been making turnaround efforts to revive its lost sheen, none seem to be working out. Earlier, the company changed its logo, store designs, advertisements and pricing model to attract consumers. But these strategies failed to deliver desired results.

Further, the company's comparable sales (comps) don't paint a rosy picture. Although the metric improved by 0.3% and 0.1% in the first and second quarters, it declined 5.4% in the third quarter of fiscal 2018, crushing all hopes of a turnaround. Also, the company anticipates comps for fiscal 2018 to decline low-single digits compared with the prior view of remaining almost flat.

Moreover, it has been struggling with shrinking gross margin, which is likely to remain under pressure in the fourth quarter of fiscal 2018. Management plans to right size inventory levels, which may hurt gross margin for the next few quarters.

Moving on, the company witnessed sales decline of 5.9% in the nine months ending Nov 3, 2018. Adding to the woes, it lost $330 million in the same time frame. Amid such downsides, the company had a soft start to the recent holiday season, which was touted as a golden opportunity for it to get back on track. Per media reports, the company had a showdown on Black Friday with flat traffic year over year compared with 3% growth at Macy's M , 12% growth at Walmart WMT , and 16% growth at Target TGT .

Apart from these, the company has long-term debt of $4 billion that has marred its operational performance over the past few quarters. Also, it is not producing enough free cash flow to repay debt.

This Zacks Rank #3 (Hold) company has lost 56.5% in the past six months, underperforming the industry 's decline of 21.9%. Further, the Zacks Consensus Estimate for fourth-quarter fiscal 2018 earnings have moved south in the past month from 20 cents to 19 cents. This indicates exceedingly bearish analyst sentiment, reflected by five downward estimate revisions versus none upward over the past 60 days.

Nonetheless, management is not sitting idle, and looking at every nook and cranny for growth prospects. In this regard, J. C. Penney has taken up several strategic initiatives to transform from a brick-and-mortar retailer to an omni-channel company. In order to enhance customers' shopping experience, the company has been focusing on remodeling, renovating and refurbishing its stores. J. C. Penney has introduced a new value proposition, "Get Your Penney`s Worth", under which selected items of private brands are available for just a penny.

The company is also taking initiatives to boost sales with special size offerings. In this regard, J. C. Penney unveiled Shaquille O`Neal XLG brand, especially designed for big & tall customer. It also launched fashion tween brand, Obsess, and redesigned Okie Dokie children's private brand. Further, the company has collaborated with Fanatics, Inc. to launch Fanatics shops to attract sports fans to purchase the newest and popular team apparel inside their local J.C.Penney store. Additionally, the in-store Sephora departments continue to outperform by drawing more customers. Sephora is doing exceptionally well and is one of the best performing categories.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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