J.C Penney (NYSE: JCP) has announced it will be closing six stores by the end of April, along with a call-center in Kansas. This comes after 27 locations were shut down in 2019 and sales of furniture and appliances scrapped. While the company’s focus is back on apparel and related merchandise, it is continuing to battle with the so-called ‘retail apocalypse’, as online retail giants begin to take over.
J.C Penney’s stock is down a whopping 90% from its five-year market peak in 2016, but new CEO Jill Soltau is pledging to restore the retailer to its former glory. The market is likely to become more and more challenging as retail moves into the online world, an area flooded by the likes of Amazon (NASDAQ: AMZN), Shopify (NYSE: SHOP) and MercadoLibre (NASDAQ: MELI).’
J.C Penney’s Online Retail
The retailer doesn’t make it appealing for customers to purchase online — having to spend a huge $99 to qualify for free shipping or charged $8.95 for regular postage. Other retailers like Macy’s (NYSE: M) offer free shipping on orders over $25 and Nordstrom (NYSE: JWN) has free shipping on any order. J.C. Penney does give consumers the option to buy products online and pick it up in-store on the same day, but it’s not the same as free shipping.
Is it Likely J.C Penney Will Survive the Decade?
The company is $4 billion in debt with cash and equivalents that equal $157 million. Adding fuel to the fire is the fact that J.C Penney has more than $2 billion owed to its suppliers. Last year, sales were down by 8% in the first 3 quarters and dropped by 9.3% in the last.
J.C Penney’s survival plan for the apocalypse in the next decade could be hampered by a number of factors such as a recession in the U.S, lenders refusing to extend the company’s credit, growth failure, or not selling enough real estate to fund operations and ease debt.
The reality is that, in the next 10 years, J.C Penney will have more than $3 billion of debt that needs to be paid and the company is not making anywhere near enough cash flow to pay it off. It’s got a lot of work ahead if it wants to stay on the playing board.
Ways J.C Penney Plans to Reinvent Itself
The retailer’s following on social media is low compared to competitors. J.C. Penney has a following of 800,000 people on Instagram, whereas Macy’s has 1.9 million, Target (NYSE: TGT) has 4.2 million and Zara boasts a huge 37.8 million followers. With the younger generation being the most active on social media, with an estimated engagement rate of 85% from young U.S teens, the retailer really needs to target younger shoppers. So far, its social media efforts have included a #MemoryMade hashtag for holiday photos and its new ‘Shutterfly Picture Pop Selfie Studio’. The company also teamed up with Pinterest (NYSE: PINS) to showcase curated pinboards of home goods for customers and they also teamed up with influencers.
J.C Penney launched an experimental “brand-defining” shop late last year that reflects a mix between Target and H&M. It does look a lot more appealing than its older stores, but it still doesn’t solve its core problems. J.C Penney also operates Sephora store-in-stores at roughly three-quarters of its shops across the U.S. The company recently explored a new concept store for Sephora and complemented its products with new in-store spa and salon services. However, a more strategic move might have been to split Sephora’s products throughout the store in different areas, in a bid to prevent shoppers from going straight to the one place for Sephora.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.
Written by Alsha Coppolina.
Contributing Writer at MyWallSt
This article was written by one of our MyWallSt contributing writers.