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Cramer: J.C. Penney Goes From Bad to Dire

Editor's Note: This article was originally published at 10:36 a.m. EDT on Real Money on Aug. 9. To see Jim Cramer's latest commentary as it's published, sign up for a free trial of Real Money.

NEW YORK ( Real Money) -- I have to admit, this Penney-Ackman-Ullman saga has become pretty difficult to stomach. When Bill Ackman took a huge stake in J.C. Penney (JCP - Get Report) and then pushed for Ron Johnson to come in and turn it around, we were willing to give him the benefit of the doubt. Penney had been struggling for years, and Johnson seemed like an intriguing candidate, given his excellent work with Apple (AAPL) retail stores.

But this one has been downhill ever since, and as someone who comes from a retail background and has been steeped in it all my life, this Penney tale of woe sure doesn't feel like it's going to end well.

You see, right now is crunch time in retail. If you recall, as Johnson's strategies backfired and sales fell hard, the worries became whether Penney would have enough credit to get through this holiday season. That was a main reason why Mike Ullman, the former CEO, was brought back in, temporarily, to run the place. Sure, Ullman, the man Johnson initially replaced, may not have been setting the world on fire in his first go-round at Penney. But no one had doubted the pre-Johnson balance sheet or Penney's ability to weather any storm. The Ullman era that so angered Ackman had been punchless but not dire.

So when the board tapped Ullman to come back, the bankers and credit holders welcomed the move as a sign of stability, and Ullman was able to raise money at decent terms to keep the business going. Further, the suppliers like Mike. They trust him. They know he will find a way to get them paid. They were willing to ship to him, betting he could get some of the older and now alienated customer base to return.

Now this turmoil is coming at the exact wrong time for investors and the suppliers. It's too hot, too ugly. Ackman's position, now outlined well in the Journal, is that time is precious and that Ullman must go. And while there are lots of reports floating around about dream teams that could replace Ullman, they tend to be a little unrealistic, because who in heck wants to come in and run a company where you have two masters, Ackman and the board, and they are at odds with each other?

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