Thomson Reuters paints a dismal past and future picture for both J.C. Penney and Sears. The consensus sell-side target for J.C. Penney calls for sales of $12.5 billion in the past two years to drift down to $12.24 billion this year and to about $12.2 billion in the two years ahead. Will those estimates remain if J.C. Penney announces more store closures? Sears is by and large not followed by Wall Street any longer, which only makes its outlook seem even more questionable. The revenues for Sears in 2014 were $36 billion, but that was down to $16 billion a year ago. Not very promising for either company.
If either stock manages to dip under $1 per share, the key exchanges will have some serious decisions to make. Neither the NYSE nor the Nasdaq prefers to keep stocks with a full listing if their shares trade under $1. The NYSE can choose to boot any company’s common stock if the share price goes and remains under the $1 mark for 30 consecutive days. The major exchanges also will look at the market capitalization of any listed company, but the $1 price minimum is generally the most common reason a stock would be delisted.
At the time companies are given a period to respond or to remedy any listing deficiencies, most companies opt for the “reverse stock split” to rectify the situation, often viewed by the trading and investing public as a final act of desperation by a company. If a company is removed from either exchange, the shares often end up trading over-the-counter for some time and many investors are simply unable to easily buy or sell the shares based on rules at their brokerage firms or by their own investment policies.
Sears was last seen trading down 3% at $1.27, in a new 52-week trading range of $1.24 to $9.63 and with a market cap of less than $150 million. J.C. Penney shares were trading at $1.65, with a market cap just above the $500 million mark.
24/7 Wall St. has already proposed that J.C. Penney just change its name to “The Penny.” Perhaps Sears could change its store names to Smears and Decay-mart. These may seem unkind, but there is nothing kind that any sensible investor (or consumer) has to say here.
Feel free to take our poll about whether it will be Sears or J.C. Penney that becomes a penny stock first. This poll was set to expire in one week.