Wall Street has started to make final bets on which retailers will survive the holiday season intact. Yesterday, as a major Sears Holdings Corp. (NASDAQ: SHLD) board member left, its share sold off. Nordstrom Inc. (NYSE: JWN) said it suspend a strategic review that might have ended in going private. J.C. Penney Co. Inc. (NYSE: JCP) have shares dropped so far that the company’s market cap is only $1 billion, despite annual revenue of about $12 billion. Such a discount is nearly unprecedented.

The J.C. Penney market valuation is a sign that experts believe that holiday sales may be poor enough that the struggling retailer will have to sharply cut its store count and employee levels once again. J.C. Penney has been mentioned as an eventual Chapter 11 target, which would take shares from their current $3.40 level to near zero. Its shares already are down 60% this year.

J.C. Penney has about 875 stores left. It promotes its JCPenney.com website to investors as its foray into e-commerce. The site is lost in a sea of larger online divisions of retail companies, and of course retail “Death Star” Amazon.com.

In March, J.C. Penney said it would close 138 stores. After a weak holiday, if it has one, the count will not have been nearly enough. Revenue in the most recent quarter was up 1.5% to $3 billion. However, same-store sales continued to fall. Its long-term debt is $3.8 billion. Among the risk factors posted by the company with the SEC:

If an event of default occurs and is continuing, our outstanding obligations under the term loan credit facility and the senior secured notes could be declared immediately due and payable or the lenders could foreclose on or exercise other remedies with respect to the assets securing the term loan credit facility and the senior secured notes, including our distribution centers and certain of our stores. If an event of default occurs, there is no assurance that we would have the cash resources available to repay such accelerated obligations or refinance such indebtedness on commercially reasonable terms, or at all.

The day of reckoning for that debt may come as soon as early next year, if J.C. Penney has a difficult holiday season. And it could very well face that problem. A slew of retailers, both large and small, are desperate to have a good fourth quarter, for the same reasons J.C. Penney must. Not all of them can be winners. Weak brands with limited inventory and low traffic will be in trouble. J.C. Penney is a candidate to head that list.

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