24/7 Wall St.

The investor bets that J.C. Penney Co. Inc. (NYSE: JCP) shares will drop got a boost. Short interest in the stock rose by 13.5 million shares to 119.7 million in the most recent period, which ended March 15.

On the surface, the gamble makes a great deal of sense. The stock trades at $2.95, against a 52-week price range of $2.35 to $6.30 a share. It has traded down nearly 20% this year.

J.C. Penney continues to be dogged by the perception that it is an old-line retailer that will not survive. It is too small. The balance sheet is too weak. Its brand has faded. Much larger retailers, like Walmart, are insurmountable competition. Retailers closer to its own size, like Sears and Kmart, need to deploy desperate tactics, some of which J.C. Penney has to match. Its online presence is a tiny sliver of Amazon’s.

J.C. Penney earnings for the most recent quarter and the full year 2017 exceeded expectations. However, for a wounded company that often does not mean much. For the year J.C. Penney reported:

Total net sales decreased (0.3) % to $12.51 billion compared to $12.55 billion last year. Comparable sales increased 0.1 % for full year 2017. The slight decline in total net sales was primarily due to store closures in 2017, most of which closed in the first half of the year, and was partially offset by incremental sales for the 53rd week.

Flat revenue and same-store sales are not a winning formula.

Another blow to J.C. Penney is that the short interest in its stock is an extraordinarily high 41% of the float. Many of those shareholders have probably gambled that J.C. Penney will not be around at all later this year.

Unlike at many other retailers, quarter-to-quarter results posted by J.C. Penney are more than a sign of its short-term performance. Rather, they tell whether the company will become food for vultures.