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JC Penney (NYSE:JCP)’s Approach to Failure

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JC Penney (NYSE: JCP) has been dropping hints since the third quarter that their sales have been dramatically slow. Oblivious of these warning, speculators still set high expectations for the future, but the third quarter wrapped up with expectations falling short. Even though sales have been stagnant ever since but retailer stocks keep rising. Here is why:

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–          Traffic generated by Sephora: This partnership to date has proved beneficial for JC Penney (NYSE:JCP). According to Sephora’s CEO Mike Ullman, Sephora moves forward into the year with the objective to continue its tend of double digit growth, generate and drive traffic as well as maintain customer loyalty. At this point, Sephora is the best on-going business for cosmetics and perfumes in all 500 JC Penney (NYSE:JCP) stores. Sephora not only attracts customers to its store but these customers make further purchases from other surrounding stores too. Even though the traffic is still negative but possibility of improvement has started surfacing.

–          Lower clearance advantages : As the saying goes, “A customer once lost is hard to regain” but that hasn’t been a problem for JC Penney (NYSE:JCP), as the firm has attracted customers again through it door buster sales. Offering such sales has the tendency to damage businesses especially when at a fragile stage. But according to JC Penney (NYSE:JCP), the company has managed to attain just the right amount of inventory so that the clearance merchandise is down till 30% as compared to last year. This would eventually affect the customer flow for the year but the firm believes that this year they expect better customers.

–          Customers come back: Looking at competitors like Macy’s (NYSE:M), Kohl (NYSE:KSS) and Dillard’s (NYSE:DDS), all reported sales fall but JC Penney (NYSE: JCP) recorded an achievement. For the competitors, the competing line is prices but for JC Penney (NYSE: JCP) the key is the returning customers. These frequent customers along with a few promotional offers have shown better same store results. This element would prove fruitful in the long run once the traffic turns positive.

–          Season Sales: Harsh winters of last year took the blame for falling sales throughout the country. The White House even blamed the falling economy on the harsh winters. But this year around the fall is warmers hence customer visits are more frequent at all the store outlets. Also helps in the promotion of seasonal sales. The weather needs to change around the year for that to happen.

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–          Making Profits: Even though the bottom line sales for JC Penney (NYSE: JCP) hasn’t given very impressive numbers, but a positive flow is anticipated by the end of the year. Profits are expected to roll in once the company produces extra cash after payment of its investments in its business that provides extra yield for shareholders. A firm foundation is a requirement at this point as the free cash flow becomes positive, it gives JC Penney (NYSE:JCP)  more flexibility to explore new options and make its financial standing strong.

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