J.C. Penney’s Cautionary Tale

J.C. Penney’s Cautionary Tale

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What happens when a mid-market retailer abandons their core customer base while failing to connect with a new target audience? Well, you might think that no company would be so foolish as to do such a thing, yet J.C. Penney (JCP) has seemingly bucked this conventional wisdom over the past year, and is paying a steep price for doing so.

Late last month J.C. Penney released its earnings report for the fourth quarter, and what it showed was nearly unfathomable to industry experts. The year-over-year same store sales figures dropped an astounding thirty two percent. At the center of this debacle is CEO Ron Johnson who took over in January of 2012 after successful stints at Apple (AAPL) and Target (TGT). While Johnson accepted the blame for the company’s failures at a recent press conference, he reiterated that he believes these are simply the growing pains for a company in the midst of the transition and that there is light at the end of the tunnel.

Most industry experts agree the biggest problem for J.C. Penney is that they lost the core customer base that was comfortable with the discount-retail nature of the store by trying to modernize and make the stores trendier. At the same time, they did this while failing to get a stranglehold on a younger demographic that they were seeking to attract. This is a combination for disaster, and it will be difficult for the company to regain that core customer base now that they have moved on to competitors like Macy’s (M) and Kohl’s (KSS).

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J.C. Penney’s stock has been in a free fall. Because of this, it may be a good time to buy if you have faith in Ron Johnson’s turnaround plan. If not, the company’s competitors could very well see increased business flow through their doors. We have assembled a list of the company and its competitors to help you start your research.

1. J. C. Penney Company, Inc. (JCP, Earnings, Analysts, Financials): J. C. Penney Company, Inc., through its subsidiary, J. C. Penney Corporation, Inc., operates department stores in the United States and Puerto Rico. Market cap at $3.6B, most recent closing price at $16.44.
 

2. Target Corp. (TGT, Earnings, Analysts, Financials): Operates general merchandise stores in the United States. Market cap at $43.45B, most recent closing price at $66.76.


 

3. Macy's, Inc. (M, Earnings, Analysts, Financials): Operates department stores and Internet Web sites in the United States. Market cap at $16.44B, most recent closing price at $41.58.


 

4. Kohl's Corp. (KSS, Earnings, Analysts, Financials): Operates department stores in the United States. Market cap at $11.16B, most recent closing price at $48.54.


 

5. Nordstrom Inc. (JWN, Earnings, Analysts, Financials): Nordstrom, Inc., a fashion specialty retailer, offers apparel, shoes, cosmetics, and accessories for women, men, and children in the United States. Market cap at $10.7B, most recent closing price at $53.49.
 

6. Sears Holdings Corporation (SHLD, Earnings, Analysts, Financials): Operates as a retailer in the United States and Canada. Market cap at $5.55B, most recent closing price at $52.10.


 

7. Saks Incorporated (SKS, Earnings, Analysts, Financials): Operates fashion retail stores in the United States. Market cap at $1.77B, most recent closing price at $11.68.
 

 

8. Wal-Mart Stores Inc. (WMT, Earnings, Analysts, Financials): Operates retail stores in various formats worldwide. Market cap at $241.69B, most recent closing price at $72.25.
 

 

 

(List compiled by Dan Connelly)

 

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