Tomahawk, WI 11/01/2013 (BasicsMedia) – J.C. Penney Company, Inc. (NYSE:JCP) faces accusations that it has hired a legal firm that has experienced in handling bankruptcy-related issues. If this is true, I understand why the company would take such a path bearing in mind the issues JCP had to deal with in 2013. However, can JCP embark on such a journey seeing that their efforts to remain in business and make the company profitable have started bearing fruits? Nevertheless, when this story first appeared, JCP’s top executives denounced it as nothing other than rumors that lacked merit.

JCP’s Decisions in 2012 Came Back to Haunt it

When the news first broke through, JCP shares suffered a significant drop. On the other hand, it is important to point out that JCP’s struggles did not start in 2013. Long-term shoppers at JCP, and who had remained loyal to this retailer for years, felt undervalued when the company decided to go upmarket towards the end of 2012. The decision to focus on satisfying the needs and demands of the upmarket clients left JCP with egg on its face. Loyal customers suddenly acquired the courage to respond the only way they could, by stopping to buy at JCP.

Loss of long-term shoppers hurt JCP in ways it never thought was possible. Ever since, the company has struggled to win back the confidence and trust of its customers. The upmarket clients it had rushed to satisfy did not find its products as attractive as JCP envisaged. The company suffered serious ramifications because of one simple decision made towards the end of 2012. Sales dropped massively, while revenue figures were noting to write home about. Worse yet is that JCP’s cash reserves suffered a huge dent due to the decision to go upmarket.

JCP Spends Large Sums to Attract Customers Back

JCP was then forced to spend huge sums of money on store remodels, hoping that this would help bring back the customers it lost. As long as JCP could not raise enough cash to support its daily operations, it faced a bleak future. It had to organize a secondary IPO during the third quarter of 2013 period to raise more cash to help support its operations. It targeted $1 billion from this secondary IPO but succeeded in raising $785 million. Since then, JCP’s stock has improved significantly, and there is real hope that the company could finally be out of danger.

By the end of the current fiscal year, JCP says its liquid assets will be close to $2 billion. This shows the company is on a good path. It needs to hasten the process to convince customers and investors alike that it is financially stable. Its sales figures have to improve as well. JCP cannot afford to make costly mistakes such as the one it made last year to go upmarket. If it does, it may never recover the way it has done this year. Its top executives need to understand what customers want, and appreciate what works, without rocking the boat from within as they did in 2013.

It is a bit early to say with certainty that JCP’s worst moments are gone for good. What I can say is that it has embarked on a solid path, and there is a lot of hope going forward.

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