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Penney (JCP) would almost certainly fail. In that article I make the following points.

The company is deteriorating financially, and this deterioration is accelerating while management does not appear to be at all alarmed. Penney brand. Instead it tried to win back its old customer base despite the fact that it needed to reinvent its image. It came out with its desperate sounding "We're Sorry" campaign, which I equated to the company "begging" for business. P. Penney vendors. But even here there is definitely a michael kors outlet store bifurcation that benefits some retailers, but not all. I will discuss this later on. Also, while a lower stock price is often bullish, in this case it is not given that the company may need to raise capital soon. The one thing that the company has going for it is that there are willing lenders, as evidenced by the large debt issuance in the second quarter. But this will only buy it time. Penney will either go into bankruptcy, or it will postpone this event through perpetual secondary offerings until one of its marketing strategies works. But this can take years and hundreds of millions of shares being issued. Penney is in terrible financial shape. Penney has failed to define its target market. While it brought in Debra Berman to lead marketing, this recent change speaks to the utter failure up until now in the company's efforts to determine its customer base and to successfully get these people into the stores. This is evidenced in large revenue increases from companies like Michael Kors (KORS) and Dollar General (DG). Penney stock if they own it, or they should consider selling it short if they are more aggressive. Given the recent fall in the share price and renewed pessimism in the name, I would recommend that authentic michael kors outlet a short position be placed at around $15.50 michael kors outlet online $16.00. Penney saw its sales for the second quarter drop 11% year on year from $3.02 billion to $2.67 billion. This drop is a slight improvement over the 16% drop the company saw year over year in the first quarter ($3.15 billion to $2.64 billion). The improvement can be due to a couple factors: a stronger U. S. retail environment, or the fact that fewer customers are becoming disenfranchised since so many of those who decided to leave have already done so.

The company's net loss grew substantially from $147 million to $586 million, which is the worst figure that the company has seen during its downward spiral over the past few years. This is worrisome, and given that the company has only $2.32 billion in shareholder equity, losses such as these are unsustainable. Penney was fortunate in that it was able to secure $2.18 billion in loans during the second quarter. This masked what would have been a catastrophic drop in working capital from $284 million to ($700 million), or a $1 billion drop quarter over quarter. With the loans the company's working capital rose to $1.48 billion, which gives the company time, but not much. I should also note that much of the company's working capital is in its inventory, which amounted to $3.16 billion. The notion that inventory should be counted as a current asset alongside cash and equivalents is a dubious one.

To give investors an idea of how much time the company has before it is in danger of a liquidity crisis, recall that the company's working capital fell by over $800 million from Q4 2012 to Q1 2013, and then by another $1 billion in the most recent quarter without the loans. This means that unless lenders are willing to support the company, or unless there is some sort of magical turnaround in the company's business, it will only be liquid for 5 or 6 months at best (and this assumes that sales and profits do not deteriorate further).

Management refuses to acknowledge what is so apparent to myself as well as several bond and preferred stock holders viz., the company is in serious financial trouble. CFO Ken Hannah opens his part of the conference call by saying:

Our results reflect the progress we are making on our journey to fix the problems we face and stabilize the business.

Whether Hannah is trying to keep up appearances or whether he is unable to draw conclusions from basic data, the company is in serious financial trouble, and management refuses to acknowledge it. Penney has made little to no progress in refiguring its image, its brand, and its conceptualization of its customer base since my previous article. Penney brand and experience. To quote him from the conference call:

Our top priority in the second quarter has been to improve traffic michael kors outlet and purchase conversion by reconnecting with our customer who frankly had lost faith in us.

As I argued in May, this is simply the wrong approach.

By attempting to get its old customers back, the company's actions are akin to somebody trying to get a job back after being fired for negligence. Given the highly competitive red bottom shoes nature of the retail landscape, I doubt this strategy will work.

While it has only been one quarter, the horrendous financial results provide strong evidence that I was right in May. Penney needs to fill in order to attract these customers. If we look at successful retail stories such as Wal Mart, Costco, Dollar General, or Apple, there is a market niche that a large number of Americans can point out even if they don't shop at these establishments. It is no secret that Wal  at a low price, or that Costco appeals to customers who want to buy every day items such as toothpaste or cereal in bulk so that they can get a lower price. Penney instead of discussing how customers are drawn to brands such as St. John's Bay or Arizona. Until he does this sales will continue to be www.forbesmelchior.com weak and the company will continue to lose money. Penney appears to have going for it is a relatively strong retail environment. Three indications of this are the rise in year over year retail sales, the rise in consumer savings, and the rise in consumer confidence. These are charted below. All charts are courtesy of Trading Economics. Penney? I don't think that it does. The performance of other retailers suggests that lower middle income consumers are not doing so well. Dollar General saw revenues rise 8.5%). Penney. Penney's competitors Macy's (down 2%) and Kohl's (+2%).