As if JCPenney needed more turmoil as the management team tries to stabilize the business, the sale of $1 billion in new shares last week raised a lot of eyebrows. What, exactly, is the company’s cash position heading into Q4, and are things worse than reported? Here’s my comment from RetailWire:
A stock sale (if successful) can only provide a short-term supply of cash rather than a longer term answer to the question of how JCP returns to profitability on its depressed sales base. And the current shareholders (including hedge funds who bought in after Bill Ackman’s exit) can’t be happy about the entire situation beyond the share dilution.
While sales at JCP may be about to turn a comp-sales corner, the profit model (margins and expenses) appears unsustainable in the $13-14 billion sales range. Where is the urgency about converting the failed merchandising efforts of the Johnson era into traffic, sales, cash, floor space and fresh inventory? It’s time for Mike Ullman and the JCP team to stop acting like it’s “business as usual.”