Word on the Street is that J.C. Penney Inc. (JCP) is looking to replace CEO Mike Ullman. A few names being thrown around are Foot Locker Inc.‘s (FL) Ken Hicks and Hudson’s Bay Co.‘s (HBC) Bonnie Brooks. This news, which was first reported by CNBC, was enough to send shares of JCP up nearly 7% today. And at time of posting, shares continue to climb after hours.
But I don’t recommend you get caught up in the hype—In my opinion, JCP is not for sale.
This company is no stranger to executive shakeups—just over a year ago the company replaced its President and top marketing executive after he failed to turn around the company’s brand image. Then last April CEO Ron Johnson stepped down after activist investor and former supporter Bill Ackman called for his ouster. And now Ackman is pushing to have Mike Ullman replaced post haste. This corporate shuffle hasn’t worked in the past and I’m not convinced it will work any miracles anytime soon.
Fun fact: The C. in J.C. Penney—the middle name of the company founder—stands for “Cash.” However, a catchy name can only go so far as this company has been hemorrhaging cash for the past few years.
The company’s failed rebranding strategy is expected to take a toll on second-quarter sales and earnings. When J.C. Penney reports last quarter’s results on August 20, analysts are calling for a 7.6% decline in sales and a 154.1% plunge in earnings. Ouch.
This is while the Department Stores industry as a whole is expected to see 29% bottom-line growth. Even troubled rival Kohl’s Corp. (KSS) is headed towards 6% earnings growth. Macy’s Inc. (M) is expected to see 17.9% growth.
This is one out of several reasons why JCP is a flat-out sell in my book. If you view on its Portfolio Grader Stock Report page, you’ll see that JCP outright fails on five of the eight fundamental metrics I graded it on, including:
- Sales Growth
- Earnings Momentum
- Analyst Earnings Revisions
- Cash Flow and Return on Equity
Couple this with lackluster operating margin growth, earnings growth and a weak track record of earnings surprises, and this Moderately Aggressive stock receives a D for its Fundamentals. Even worse, institutional buying pressure for JCP has screeched to a grinding halt so it receives an F for its Fundamental Grade. JCP is a Strong Sell so if you’re a current shareholder I recommend you find a good time to unload this ship before it sinks back down.