JC Penney: A Turn-Around Story With Balance Sheet Protection
JC Penney (JCP) was founded in 1902 and has become one of the major retailers, operating 1,102 department stores in 49 states. The company sells apparel and footwear (50% of revenue), accessories, fine and fashion jewelry, beauty products (through Sephora) and home furnishings. In addition, the department stores provide customers with services such as a styling salon, optical, portrait photography and custom decorating. In 2011 the company recorded sales of $17.3 billion.
JC Penney has not been performing well. Earnings per share decreased from a high of $4.93 in 2007 to a net loss of $0.70 in 2011. Gross margins decreased from 40% to 36%, and sales per gross square foot decreased from $177 to $154. The latest quarter was very disappointing, with a net loss of $0.75 a share and an elimination of the dividend. Investors reacted immediately and the stock price dropped to a low of $19 (52-week high of $43). The stock price has recovered some of its lost ground, and is currently trading at around $28.
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