Yahoo Finance J.C. Penney is toast in 2021
J.C. Penney may have new owners and 700 or so stores with the lights still on after its recent exit from bankruptcy, but its future is almost as bleak as it was before its stint in the courts.
Credit for that, retail experts say, goes to years of mismanagement that put J.C. Penney in a terrible position to play in the digital shopping movement that was well underway before the pandemic. It’s a movement that has only gotten stronger during the COVID-19 health crisis, shifting billions of dollars in consumer sales to strong retailers like Walmart (WMT), Target (TGT), and Amazon (AMZN). In turn, extra stress has been placed on the business models of ill-prepared retailers such as J.C. Penney.
Will J.C. Penney survive? “Probably not,” Forrester retail analyst Sucharita Kodali told Yahoo Finance Live on Thursday.
Adds Kodali, “J.C. Penney has been on life support for years now. It has just been on a steady slide down, and it has very, very little chance of recovery. It’s not in great real estate locations and it’s not well off financially. It has no brand resonance with consumers and it’s just not well positioned for the future.”
‘What is shocking is that it is still alive’
Add to the list of concerns it doesn’t have a strong retail CEO anymore, either.
J.C. Penney’s new owners — mall kingpins Simon Property Group and Brookfield Asset Management — gave CEO Jill Soltau the boot this week about a month into its post bankruptcy life. Soltau’s replacement as of Jan. 1 is Stanley Shashoua, Simon Property’s chief investment officer.
Soltau was brought into save J.C. Penney in October 2018 after a successful stint leading crafts retailer Jo-Ann Stores.
Unfortunately for Soltau, her tenure was more talk than action. Burdened by billions in debt and a plunging stock price, Soltau was unable to get her turnaround plan into high gear. In fact, most analysts on the Street that covered J.C. Penney say Soltau’s turnaround plan — mostly focused on light touch-ups to the visuals of the stores and reducing inventory — was never going to truly drive a sustainable recovery for the company.
The stock fell below $1 some two months after she got the job. J.C. Penney produced 10 quarters of net losses under Soltau’s watch, and entered bankruptcy in May.
Now the fate of J.C. Penney is in the hands of Simon Property and Brookfield. It remains unclear what their intentions are for the beleaguered chain other than to feed it money for now to keep the lights on so key anchor locations don’t go dark and scare away customers to the mall. The other option could be to slowly wind the chain down and rent out or sell the locations to Amazon for distribution space.
Analysts expect more J.C. Penney store closures to emerge in early 2021 after a likely dismal holiday season.
“What is shocking is that it is still alive and that it has not dived through the course of the pandemic. I think if anything, that’s a lesson in how resilient retailers are and how hard it is to really kill a retailer,” Kodali says.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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