J.C. Penney’s disappointing outlook triggers fears of another retail bankruptcy in 2017

J.C. Penney Feared Next Retail Bankruptcy 2017 After Disappointing Outlook
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J.C. Penney Cuts Outlook, Sparks Fears of Next Big Retail Bankruptcy in 2017

Forget Sears Canada Inc (TSE:SCC) for a minute. Another big department store chain is feared to bite the dust in the ongoing retail apocalypse. J C Penney Company Inc (NYSE:JCP) has become the latest victim of the great retail apocalypse. Wall Street traders are betting that the retail giant could be the next big retail bankruptcy 2017. At least, that’s the idea one gets when looking at JCP stock price chart.

J.C. Penney stock crashed on Friday during after-hours trading, posting the worst drop in over three decades. Its downward journey continued on Monday morning. A stock crash followed after the retailer cut its guidance for the next quarter. The retailer is expecting a loss between $0.40 and $0.45 a share, which is far worse than what most analysts on Wall Street were expecting.

The company owes the widening loss to its steep promotional pricing on women’s apparel—a retail category facing the worst decline at the department store chain. J.C. Penney has been finding it hard to sell women’s fashion merchandise and has had to turn to deep price cuts to move the piling inventories.

Social Media and Online Shopping Causing Retail Bankruptcies in 2017

Women’s fashion has become a fast-moving industry where new trends quickly take form and then fade away with the same speed. Social media, particularly “Instagram” and “Snapchat,” have emerged as the popular avenues from where fashion trends are mostly emanating. Celebrity endorsements and word-of-mouth marketing have emerged as more popular modes of advertising for companies on social media.

And just like young women are finding fashion inspiration online, they are also beginning to make their purchases online. The growing trend of online shopping is becoming the bane of existence for brick-and-mortar retailers. In fact, retail bankruptcies 2017 have particularly been dominated by apparel retailers.

J.C. Penney’s third-quarter warning comes on the heels of its equally disappointing second quarter, when the company delivered a loss of $0.20 a share to its stockholders.

Again, aggressive promotional pricing was to blame as the retailer liquidated 127 of its stores across the country during the second quarter alone.

So far this year, the department store chain has closed over 138 stores, which have altogether affected over 5,000 retail jobs. These are, by far, amongst the biggest retail sector layoffs to have taken place in America this year, following the thousands of job cuts at other major department store chains including Macy’s Inc (NYSE:M) and Sears.

The company’s forewarning of widening losses and growing number of store closures has us wondering if J.C. Penney will turn out to be the next big retail bankruptcy 2017.

 

Sources

JCPENNEY PROVIDES UPDATE ON THIRD QUARTER 2017 PERFORMANCE,” J.C. Penney, October 27, 2017.

Categories: Bankruptcies, News, NewsArticle

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