J.C. Penny becomes the new GM as its share price falls to the level of a penny stock
At one time General Motors was the most valuable company in the United States, and had more employees than any other company or government outside of the Soviet Union. Â Yet within just 50 years of this triumphant achievement, GM was not only on the cusp of insolvency, but their stock price had fallen to just barely over $1 per share.
Fast forward to 2017…
J.C. Penney was also one of the country’s greatest companies at the same time GM was ruling the roost in corporate America. Â But their story is much different than that of the world’s former largest automaker since their issues have mostly been tied to their inability to adapt to the future of online retail, and where they have relied too much on what worked in the past in a world that no longer exists.
JCPenney announced a $62 million dollar loss for the quarter. With the announcement, its share price plunged 16% breaking the $4 barrier for the firstÂ time. Stocks under $5 are consideredÂ â€śpennyâ€ť stocks.
Yup. JCPenney is now a penny stock â€” a Wall Street term for a company trading under $5. JCPenney (JCP) said it lost $62 million in its second quarter. Thatâ€™s more than a year ago. The retailer also said that same store sales â€” a measure of how well stores open at least a year are doing â€” fell more than 1% during the quarter.
JCPenney is the latest department store chain to announce dismal results. Macyâ€™s (M), Kohlâ€™s (KSS) and Dillardâ€™s (DDS) all reported a decline in same store sales on Thursday as they struggle to compete against Amazon (AMZN, Tech30) and Walmart (WMT).
The massive shift in the retail landscape has led many chains to shut down underperforming stores. Â JCPenney is one of them, announcing earlier this year it would be closing 138 stores. JCPenney wound up delaying the closings by a month though after consumers rushed to many of the stores to take advantage of the massive liquidation sales. –Â Mish Talk
It is interesting to see how retail has changed over the past 100 years, from stores like Penny’s and Sears which grew through their revolutionary use of catalogs and warehousing, to the rise of malls and the suburbs which saw them and a few others become the anchors in this foundation of how people shopped following World War II.
But sadly too many factors to count have helped to demolish Penny’s and most brick and mortar retail. Â Yet who would have ever guessed that when the Dow is at an all-time high, J.C. Penny’s stock would be at an all-time low.
Kenneth Schortgen JrÂ isÂ a writer forÂ The Daily Economist,Â Secretsofthefed.com,Â Roguemoney.net, andÂ Viral Liberty, and hostsÂ the popularÂ youtube podcastÂ on Mondays, Wednesdays and Fridays.Â Ken can alsoÂ be heard Wednesday afternoons giving an weekly economic report on theÂ Angel Clark radio show.