New Leadership Hopes to Turn Company Around

New Post from Andrew Brunhart

Recently, department store JC Penney plummeted financially and investors are worried.  People became skeptical of the company’s financial well-being when its stock fell to $10.12 Wednesday morning, a 13 year low.  All signs point to Penney’s future in doubt, but they don’t believe that.  

On Tuesday, Goldman Sachs gave a forecast for JC Penney that further showed Penney’s outlook does not look too good.  Goldman gave Penney’s unsecured debt an “underperforming” rating.  One analyst that works for the firm reported that she fears the company will have to tap into the debt markets for more cash.

With JC Penney looking for cash, its even more concerning to investors as they arranged a $2.25 billion loan this past spring with Goldman Sachs.  JC Penney faces a large task of trying to first find money and then devise a plan to turn the company around and steer it away from the gutter.  They believe they have just recently begun to do so.

JC Penney released a statement Thursday that it was pleased with its turnaround efforts.  Not exactly the assurance investors are looking for.  Investors are further worried because this is not a new or recent trend.  Since early February 2012, shares have lost about 75% of their value, a major reason to be concerned.  Shares rose slightly early Thursday morning which is a bit calming for investors but if you look at the big picture, JC Penney has a long road ahead of them to further turn this around.

The company is in a bit of a transition stage and may have made necessary moves to get back on track.  Former CEO Mike Ullman has been rehired after a stint that lasted with JC Penney from 2004 to 2011.  Ullman will replace Ron Johnson, who ousted by the board in April.  Johnson spent just 17 months on the job.  It seems pretty clear that Penney was not getting what they thought they’d get out of Johnson when they first hired him.  Johnson had a transformation plan that ultimately led to disastrous financial results thus leading to his departure.

With JC Penney making the move to a proven CEO in the past and the early Thursday morning rise in its stock, Penney looks primed to turn these financial woes around.  Ullman has already begun bringing things back that he was successful with that Johnson had ditched like khaki pants and specific sales programs.  Hopefully Penney will see much better results in the coming quarters.

via Andrew Brunhart: A Career in Leadership


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