Tomahawk, WI 8/21/2013 (Basicsmedia) – J.C. Penney Company Inc (NYSE:JCP) has gone through a torrid time. It is increasingly becoming clearer to investors and the public at large, that this company must carry out extensive work to regain investor confidence. As a publicly traded company, JPC has to demonstrate that it cares about what investors think of it, and reassure them that it has plans to ensure that their interests are well protected. When it recently announced that it had noticed an improvement in its sales, this was received well. However, is this increase long term or just a flash in the pan?

JCP Must Resolve Its Crisis

JCP has been moving from one major crisis to another one. It can’t be called a boring company, but the negative news coming out of JCP hasn’t done it any favors. However, even as it announced an improvement in its sales, it was not lost to investors that the company had reported Q2 of 2013 loss to the tune of $586 million, or half a billion in losses. The total sales which the company reported amounted to around $2.66 billion, which was much lower than the $3.02 billion which was reported for Q2 of 2012. The loss isn’t good, but the increase in sales is.

One of the reasons why JCP might have reported lower margins this time round was because it was forced to lower its prices on the unsold goods. This strategy was meant to clear the unsold goods from its stores. This would perhaps also explain why the company reported increased sales for Q2 of 2013. It’s still too early to say what will happen when the prices get back to their normal levels, once the unsold and old stock is cleared from JCP stores. There was a decrease in the number people shopping at JCP stores which would also explain the reduction in margins.

Capture

JCP Needs More Time, Will Investors Oblige?

 

All in all, I would say that the store needs more time to turn its fortunes completely around. Its finances have been in a mess for quite some time, and they can’t be changed in one quarter. One reason why JC Penney reported losses for the second quarter of 2013 is because of its decision to put close to $714 million to restocking the empty shelves in some of its stores, investing more in the construction of its home department, and retiring some of its debts. It’s probably a good idea to ask whether this was a good idea at such a time, or would it have been better to wait?

Why JCP Didn’t Sell More Products than It Did

The prices at which JCP’s products are being sold in 2013 have been cut down from what customers were required to pay in 2012. This should have been enough to attract more customers, and even newer ones back to JCP’s stores. I suspect that the company has probably lost some of its customers for good. If JCP can achieve its goal of possessing more than $1.5 billion at the end of 2013 like it plans to, and improve its ability to borrow money from investors and other sources to fund its working operations in 2014, it could as yet turn its fortunes around.

DISCLAIMER: This content is neither an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content in this report or email is not provided to any individual with a view toward their individual circumstances. While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained in our newsletter is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between the any predictions and actual results. Always consult a real licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment.