This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

J.C. Penney Survival Guide

NEW YORK ( TheStreet) -- If you're a J.C. Penney (JCP - Get Report) share owner, you're not enjoying your position. But don't focus on Monday's losses because there is nothing you can do about it.

What you can control is your decisions moving forward.

July represented more than a decline in share price for J.C. Penney's shareholders; it also destroyed hopes of a turnaround and quick path towards $20. Sorry, but the news doesn't get better, it gets worse.

Stocks making new 52-week lows are super-short-selling candidates. All else being equal, new 52-week lows, more often than not, continue declining. Bad news I know, but there are strategies you can employ to work through the fall and even turn a profit.

I'll discuss what you can do to minimize the bleeding if you're not ready to throw in the towel yet. First, let's look at the catalyst driving the price lower.

Last week, J.C. Penney shares went into a free fall after the New York Post ran an article alleging CIT (CIT) began restricting credit to vendors selling to J.C. Penney.

CIT offers J.C. Penney vendors credit through a process called "factoring." Factoring works this way: A vendor sells to J.C. Penney and instead of billing J.C. Penney and waiting 30 or more days to get paid, it receives maybe 98% of the invoiced amount from CIT right away. CIT invoices J.C. Penney for the merchandise, waits (and hopes) to get paid and profits from the difference.

If CIT believes J.C. Penney may not pay its bills, CIT will inform vendors they will not receive immediate payment and vendors will stop shipping merchandise. J.C. Penney can't sell from an empty apple cart, and the situation can spiral into a fast self-feeding panic among vendors.

J.C. Penney was quick to deny the rumor and stated "that a news report which appeared yesterday is untrue and that it has been told so directly by CIT, the subject of that report."

It's standard procedure for companies to "deny, deny, deny" problems; otherwise, the wheels can quickly fall off the cart. In J.C. Penney's case, it's more than reasonable to believe the company's rebuttal because unless it is burning through cash at a much greater rate than anyone would guess possible, it has more than enough credit lines available to pay the bills.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
JCP $8.65 0.00%
AAPL $126.60 0.00%
FB $86.91 0.00%
GOOG $521.84 0.00%
TSLA $269.15 0.00%

Markets

DOW 17,757.91 +138.40 0.79%
S&P 500 2,077.42 +14.31 0.69%
NASDAQ 5,013.1230 +26.2560 0.53%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs