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J.C. Penney: A Band-Aid Won't Stop the Bleeding

NEW YORK (TheStreet) -- In a recent TheStreet article, Rocco Pendolla explained the disastrous state of Sears (SHLD) and his headline spot on: Sears: A Pathetic Picture Is Worth 1,000 Words.

Well, like Rocco, I have another picture for you worth 1,000 words.

Much like Sears, J.C. Penney (JCP - Get Report) has fallen on hard times. The Plano, Texas-based department store chain began as a public company in 1929 and grew at an incredible pace, with shares topping $85 in 2007. However, in 2009 the shares bottomed out to around $14, and more recently they sank to a two decade low of around $6.80.

Its shares currently trade around $6.50 and are down 28% for the year to date.

As the FAST Graph below illustrates, Penney is scrapping the bottom of the barrel, with no dividend and liquidity of around $2 billion ($1.7 billion in cash and $480 million of credit). That may seem like a lot of cash but remember, Penney has some off-balance sheet obligations to worry about.

As per the most recent 10-K, Penney's has 1,104 stores located in 49 states and Puerto Rico. Of these sites, the company owns 429 buildings and leases 775 stores (of which 123 are ground leased). That means Penney is obligated to pay around 775 landlords for its services, renting space primarily in malls across the U.S.

Penney's latest quarter saw red ink of around $490 million (in net income) and negative operating cash flow of approximately $700 million. The company's average sales per square feet have dropped from $160 in 2008 to $116 in 2012; a clear indicator that losses are mounting and liquidity is under fire.

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