The competition in the retail market is huge. Just look at J C Penny. That stock has plummeted. It peaked in February 2007. Right before the financial crisis it peaked at $85, and now the same stock can be traded for $2,41. What a ride.
J C Penny is not alone. Swedish H&M is in the same boat. The stock peaked in February 2015, but the journey from 363 SEK to 125 SEK is huge. They both need to change their strategy as soon as possible as online retailers are flooding the market all around the world.
J C Penny was founded in 1902 by James Cash Penny and William Henry McManus. That`s 116 years ago. It is an American department store chain with 850 locations in 49 U.S states, and Porto Rico.
The company has been an internet retailer since 1998. It has streamlined its catalog and distribution while undergoing renovation improvements at store level. Competitors like Alibaba, Amazon and Ebay will push their prices down. So will competition from Wal-Mart, Kohl
s, Macys and Target.
The arrows are going in the opposite directions. Prices and lower margins are going down while house prices are going up. Internet retailers can afford to push down the prices because they don`t have any stores.
With 98,000 employees and growing wages it speak for itself. On January 15, 2014, the company announced it was closing down 33 underperforming stores and laying off 2,000 employees. A year later, they announced that they would close 39 underperforming stores nationwide and layoff 2,500 employees and the trend has been going since then.
In May 2018, the company reported an adjusted loss of $69 million in the first quarter and lowered its projections for the year. Sales fell 4 percent.
Earlier this year, J C Penny announced it would cut 360 jobs at its stores and corporate headquarters. They lowered its earnings forecast for the year to 13 cents per share at best, and said it can lose as much as 7 cents.
J C Penny finished the quarter with just $181 million in cash, which is down from $363 million a year ago. Much of the big decrease was because of a $190 billion debt replace. Not only that; in May, they announced resignation of their CEO Marvin Ellison.
Gross margin has declined significantly since 2016, but the U.S Census Bureau reported strong retail sales growth in May and June which can be positive for J C Penny. Sales at departments stores increased 1,8 percent YoY in May and were flat in June.
I said it many year ago; the retailer market is dead. Just look at the trend. Retailers must wake up before they end up like Radio Shack. New business models must be developed and there is no doubt that a few of them will win at the end.
It will be an enormous wild ride for the JCP stock from start on Thursday.
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