NEW YORK ( TheDeal) -- When J.C. Penney Co. (JCP) selected Ron Johnson as its CEO in November 2011, investors expected the wunderkind former Apple Inc. store designer would work some of his magic at a retail chain desperately seeking a 21st century makeover.
It's now the second year of Johnson's tenure at J.C. Penney and industry watchers are not only taking bets on when he will be fired but whether the old-line retailer will join be relegated to the final markdown of retail history.
According to industry sources, vendors are tightening credit and private equity firms are already circling. J.C. Penney shares have lost 55% in the past 12 months months. Shares were gaining 1.4% to $15.67 on Monday.
If J.C. Penney can use its assets to buy time, and Johnson can pull off the much-hoped-for transformation of the dowdy retailer, backers such as Bill Ackman's Pershing Square Capital Management LP will have their "I told you so" day.J.C. Penney's board is certainly keeping Johnson's feet to the fire, slashing his pay 97% in 2012 and refusing to award bonuses to its CEO and most top executives, according to regulatory filings. Any sane board would take those steps after the dismal figures that were the fourth quarter 2012, which ended Feb. 2: a 28.4% decrease in sales to nearly $3.9 billion, with comparable store sales down 31.7% and Internet sales dropping 34.4% over the same time in the prior year. The company also had a net loss of $552 million for the quarter, while operating cash flow was $645 million compared to $953 million for the fourth quarter of 2011. And industry observers are already predicting poor first-quarter results. Former Morgan Stanley retail analyst Walter Loeb, who now writes for Forbes, predicted that first-quarter sales could decline another 22%. Anthony Karabus, president of financial advisory firm Hilco Trading LLC's SD Retail Consulting practice, said that the transformation of J.C. Penney was needed and the concept of a store-within-a-store, which would help introduce new brands to attract a younger customer, is the right path. The problem is that as J.C. Penney tried to modernize its image, it also alienated its older core customers by doing away with its popular coupon programs, Karabus said, and the influx of new customers wasn't happening fast enough to make up for the outflow of the old.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV