J. C. Penney is the stuff of American business legend. Founded more than a century ago in a small Wyoming town by a man with a name tailor-made for retail—James Cash Penney—it built a reputation for quality and value, weathering the Great Depression and becoming one of the country’s preeminent department stores. The chain, which relocated to Plano in 1992, is the largest Texas-based retailer in the country. It has 1,100 stores nationwide, $13 billion in annual sales, and 116,000 employees. And it now teeters on the verge of financial ruin.
Rarely in the annals of American retail has there been such a swift and devastating collapse of a shopping icon. “Penney’s destroyed themselves,” says Howard Davidowitz, the chairman of Davidowitz & Associates, a national retail consulting and investment banking firm in New York. “You can’t recover from this.”
By “this,” Davidowitz is referring to four factors that have brought the company to the edge of bankruptcy: the collapse of the middle-market retail sector, the recent recession and anemic recovery, the ill-advised actions of an activist shareholder who was out of his element, and the cult of the celebrity chief executive. Penney likely could have survived one or two of these afflictions. But the combination of all four may prove to be more than the company can take; this holiday season is the most crucial in Penney’s 111-year history, and the outlook isn’t good.
Since the story was written, analysts have continued to watch the Christmas season, which looks like it will be a difficult one for Penney’s, as well as its rivals. In an effort to goose sale’s before year’s end, the company is already gearing up for a massive post-Christmas sale. The question, of course, is whether it will be enough to save Penney’s.