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JCPenney on the verge of Bankruptcy

JCPenney on the verge of Bankruptcy

: Richard West Law Office

 

JCPenney’s stock is now officially a penny stock trading below $4 per share for the first time in the company’s history. JCPenney is a Department store that most Americans are familiar with. The company operates 876 locations in 49 states and Puerto Rico. JCPenney isn’t the only department store whose financial results have been in decline: Macy’s, Kohl’s, Sears and Dillard’s all reported declining sales as they fight to remain competitive among e-commerce giants Amazon and Walmart. The paradigm shift of how millennial shop for merchandise has led to many chains having to shut down underperforming stores.

JCPenney announced at the start of 2017 that it would be closing down 138 stores by liquidating all the affected stores inventory in order to feed revenue into JCPenney’s cash flow. Liquidation sales mean large discounts for the customers but also hurt JCPenny’s bottom line. This week JCPenny reported a net loss of $62 million last quarter which is more than double what analysts predicted. This announcement caused the share price of JCPenney to plummet by almost 19%. As of August 11th, 2017 the stock was trading at 3.93 per share, an all-time low.

While there has been no mention from JCPenney executives of reorganizing the company under Chapter 11 bankruptcy protection, it may be eminent if the company can’t find a way to turn things around. Remaining competitive would require the company to address discounters like Gabe’s and TJ Maxx in addition to the large move by consumers to shop online. With so many retailers entering bankruptcy in 2017, company’s such as Wet Seal, The Limited, RadioShack, Gander Mountain, and Payless Shoe Source, filing bankruptcy may very well be the only way for the company to reorganize the business, shed debt, and remain in business.