24/7 Wall St.

After over a century as a major force in U.S. retailing, the fortunes of J.C. Penney Co. Inc. (NYSE: JCP) are such that its share price dropped below $1 to $0.99. It shows how much the competition from e-commerce and other brick-and-mortar retailers has undermined the company’s fortunes.

The fall in J.C. Penney shares is extraordinary. The stock has declined 87% over the past five years, while the S&P 500 is up 59%. Over the same period, shares of Amazon.com have risen 271%. The stark difference shows the extent to which online sales have cannibalized the balance of the industry, particularly the weakest companies in the sector.

Ten years ago, J.C. Penney’s revenue was $17.5 billion and its net income was $570 million. In 2018, revenue has dropped to $12.5 billion, and the company posted a net loss of $120 million. Over the same time frame, same-store sales have been decimated, and J.C. Penney has closed scores of stores.

One move by the J.C. Penney board caused a wound from which the company never recovered. In the hopes of moving the company into the digital era, Apple retail chief Ron Johnson was brought on board in June 2011. By April 2013 he was out. His reorganization of J.C. Penney and its stores had caused same-store sales fall-offs of as much as 20% per quarter. That fall arrested was somewhat, but the company never recovered completely.

Amazon is the villain in almost any story about retail failures. J.C. Penney never got much from e-commerce sales.

On the brick-and-mortar front, J.C. Penney had to compete with companies that grew rapidly and drained off customers from much of the industry. In the lead, Walmart, Target and Costco ate up market share.

Some analysts believe that J.C. Penney cannot avoid the fate of Sears, which means it will slip into bankruptcy. Even if it avoids that, its stock price has lost almost all of its value, and that is not going to change.

24/7 Wall St.
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