J.C. Penney’s (NYSE:JCP) Turnaround Strategy
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J.C. Penney (NYSE:JCP), which has lately been a problematic retailer gives of an impression of making advancement through the help of its new turnaround strategy. This organization has found its way back to make revenue grow, with store deals surging in the last three quarters. It is no longer losing money as fast as it was back in 2013, and albeit substantial misfortunes, J.C. Penney (NYSE:JCP) has fought hard to witness effects of the turnaround strategy.
Even when taking a face value, the organization’s affirmative financial performance objectives, buying the stock is surely not a good deal. The shocking fall in revenue under the previous CEO of J.C. Penney (NYSE:JCP), Ron Johnsnon was followed by a comeback to sales growth headed by Mike Ullman; he who was appointed back as CEO to right Johnson’s wrongs. Ullman was successful at keeping the company from being destroyed and now Marvin Ellison has been named the new CEO and he will try to continue the turnaround process as well.
The company is under heavy debt as the revenue has dropped over $5 billion with the operating expenses oscillating at $1.6 billion. The normal deals for every store have tumbled from 2010’s $16 million to simply $11.5 million in the past year and J.C. Penney (NYSE:JCP) had been operating stores which were not producing any profits. The numbers have enhanced as compared to 2013 and the loss reduced from $1.42 billion. However J.C. Penney (NYSE:JCP) is still a long way from coming back to making a profit.
The company’s analysts laid out the financial objectives of the company for the years 2015-2017 and J.C. Penney (NYSE:JCP) is expected to make an extra $2 billion in the coming years. According to the press release, the company needs to work on three goals. The first is to revitalize the focal point centre and work on the areas which generate the greatest profit such as the departments of jewelry, fashion accessories and beauty products. The second is to improve the Home Store by using quality driven items and the third is to maximize the span and incorporation of the firm’s omnichannel ability.
J.C. Penney (NYSE:JCP) hopes to accomplish $1.2 billion in EBITDA in 2017. During the past year EBITDA was negative at $216 million. As of now, the issue however is that J.C. Penney (NYSE:JCP) is being esteemed at about $2.2 billion with the present stock price exceeding 20 times the income that the organization would like to acquire in 2017. If $2 billion is procured as revenue, then before 2017 ends, the yearly revenue development would be of around 5% which what the company has been able to pull off this year. Similar store sales climbed by 6% amid the latest quarter in spite of the fact that J.C. Penney (NYSE:JCP) expects development in low-single-digit in the course of the third quarter. The question that arises now is whether J.C. Penney (NYSE:JCP) will be able it to achieve its financial goals or not.