You Can Still Shop at JC Penney!
JC Penney has filed for bankruptcy protection after more than a century of high street history, but you can still shop there. JC Penney is restructuring its debt and securing another $900 million to keep the lights on. It will close further stores and reduce debt as an immediate priority, and then look to launch an unlikely long-term comeback.
The company will be gone for good unless its operating business improves, not something investors are predicting. The stock is worth nothing. If the business flash-sold assets and liquidated tomorrow, the entire proceeds would be spread among debt-holders. It’s a sad state of affairs, especially for a former blue-chip champ like JC.
The brick-and-mortar department store was hot when mass car ownership was hot because people took pride in driving to places. You saw malls go up everywhere, and JC Penney was anchoring them down. The store attracted footfall with its stylish clothing range and home furnishings. It was a family-store, a big employer, and investors made ten times their money on its shares from 1980 to 2000!
The problems came when Sam Walton’s Walmart started gaining market share. JC Penney was losing ground before the advent of e-commerce. When it faced online competitors making shopping less expensive and more transparent, its response was to stand still. It ended the only couponing scheme that drove traffic to its stores.
This was a bankruptcy waiting to happen, but shorting it would’ve been a trap. These types of companies don’t go down instantly; they often die very slow deaths. The short-seller can be hit with spikes in stock price whenever these companies beat expectations and show any signs of life, so it’s not easy investing.
It’s possible for a JC Penney to secure new credit facilities and prolong its life span by years, so while you may eventually get a payday, there are chunky borrowing costs to take the short position in the first place, and then numerous threats of a turnaround that can make it a painful wait. JC Penney remains in this exact state of limbo. Dare to touch it?