Delusional Is Too Kind: J.C. Penney Company, Inc. (JCP), Target Corporation (TGT), Macy’s, Inc. (M)

As you can see, J.C. Penney Company, Inc. (NYSE:JCP) doesn’t seem to have a natural fit. Macy’s and Sears are better positioned in enclosed malls. Kohl’s and Target Corporation (NYSE:TGT)are taking the casual clothing shopper.

So What Can The Company Do?
If J.C. Penney is to survive, they need to make some drastic changes. If their comparable store sales are dropping by 20% to 30%, clearly there are some seriously underperforming stores. The company needs to be aggressive in identifying these stores and either closing and selling, or closing and leasing. Sears utilized this strategy, and suggested they generated about $1 billion in returns with underperforming stores over the last year or so.

J.C. Penney needs to stop issuing shares. The company’s share count has increased 2.71% over the last year. This isn’t a big deal for a growing company, but for a turnaround more shares means more difficult EPS comparisons.

The company’s jcp.com site needs a partner. With 34% less sales, customers clearly aren’t interested in jcp.com. A partnership to market J.C. Penney’s clothing through another major website might make sense. CEO Johnson could copy his former company Apple Inc. (NASDAQ:AAPL), by offering J.C. Penney products through eBay and potentially get much better results.

Looking at the numbers, I would recommend any of J.C. Penney’s competition from an investment perspective. Macy’s, Inc. (NYSE:M) and Target Corporation (NYSE:TGT) offer yields of about 2% and earnings growth of over 11%. Both companies have clear visions, and good margins in their categories. Kohl’s 3% yield is the best of the group, and if the company brings their prices down a bit, I believe they can grow faster than the 6.4% rate analysts expect. Even Sears could be a decent buy if they spun off or sold the Kmart brand. Unfortunately, J.C. Penney is a fast fading retailer. Investors shouldn’t be thinking about “long-term growth,” the question at this point is, will J.C. Penney survive? If they have another few quarters like this one, there won’t be anything left to save.

The article Delusional Is Too Kind originally appeared on Fool.com and is written by Chad Henage.

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