While retailers have been hit hard in recent years, JC Penney’s (JCP) riches to rags story is one of the most severe. Now down 95% over the last 10 years, it’s a mere shell of its former self.
And while there’s a new CEO at the helm, that may not be enough.
"They're in a leaky boat that eventually will sink," predicts Mark Cohen, the director of retail studies at the Columbia Business School, as quoted by CNN. "The prognosis for the future is not happiness."
After two CEO failures, the company has now hired JoAnn Stores’ CEO, Jill Soltau – the first woman to hold this role at the company, believe it or not. Considering that 70% of JCP customers are women, you’d think they would have done this a long time ago.
J.C. Penney announced the appointment of Jill Soltau as Chief Executive Officer and a member of the Board of Directors, effective Oct. 15, 2018. Soltau is a 30-year retail veteran who most recently served as President and CEO of JOANN Stores, the nation's largest fabric and crafts retailer
Before JOANN Stores, Ms. Soltau spent eight years at Shopko, most recently as President after serving as Executive Vice President and Chief Merchandising Officer. She joined Shopko Stores in 2007 earning various executive positions of increasing responsibility to include Senior Vice President and General Merchandise Manager over apparel and accessories. Prior to her tenure at Shopko, Ms. Soltau held several senior level positions in merchandising, planning and private brand management at Sears and Kohl's, after starting her career with Carson Pirie Scott, which was later acquired by Saks Inc.
Their previous CEO Marvin Ellison left J.C. Penney to head up home-improvement giant Lowe's (NYSE-L)
Can a New JC Penney CEO Help?
Under Soltau’s leadership, “JoAnn Stores has undergone a revitalization of branding, expanded digital and omnichannel capabilities and forged strategic partnerships to build meaningful relationships with its customers,” noted JC Penney.
While no one is doubting what she can bring to the table, she clearly has a tough job ahead of her.
Not only is JCP operating at a loss, it has billions of dollars of debt that has to be serviced. In the first six months of fiscal 2018, the company finished its second quarter with $182 million in cash and cash equivalents. That stands against $3.96 billion in long-term debt. Worse, it had negative free cash flow of $235 million.
Something has to change under her leadership. As CEO of JoAnn Stores, Soltau has been working on modernizing the customer experience and incorporating more technology into the retail model. Hopefully she can use that expertise to help J.C. Penney.
Some analysts declare that the writing may be on the wall. Even with a new CEO, they claim that JCP has lost its relevance among many consumers. Once that happens, it’s nearly impossible to regain. A debt-loaded balance sheet and negative cash flow doesn’t help.
Others argue that the company can still turn around.
Seeking Alpha says, “J.C. Penney has been growing revenues slowly since 2014 and paying down LT debt, but their stock price has continued to decline. It trades at a low P/B of 0.59 as investors worry that the company will soon close its doors. If the new management team succeeds at reviving the once renowned brand, investors will be rewarded heavily. The stock remains a speculative buy, and I think the company deserves the benefit of the doubt.”
It will be interesting to see what the new CEO has up her sleeve.
Stay tuned to The Cheap Investor for more on this developing story.