JC Penney stock is soaring by 12% after hours because they ONLY lost $235 million in the 4th quarter. Back up the truck and buy buy buy. This is a can’t miss investment. CNBC and Wall Street are gaga. The new CEO who was the old CEO before he got fired for the Apple douchebag is blathering about the tremendous 2014 that awaits JC Penney. The Wall Street lemmings are buying this load of bull again and trying to convince muppets to buy this piece of shit dying retailer.

Here are the facts:

  • 4th quarter revenue FELL by $102 million versus last year’s horrific 4th quarter.
  • Free cash flow PLUNGED by $169 million versus last year’s horrific 4th quarter.
  • For the year, their revenue fell by ONE BILLION dollars and they managed to lose $1.9 BILLION versus ONLY losing $1.5 BILLION the year before.
  • Despite producing lower sales in the 4th quarter, their inventory ROSE by $600 million, a 25% increase. Inventory should grow at the same rate as sales at a well run retailer. They missed by that much. This means massive discounting and plunging margins for the 1st quarter.
  • Their debt ROSE by $2.6 BILLION in one year. They must repay $700 million in the next 12 months. Good luck with that.
  • They now have $5.6 BILLION of debt versus $3 Billion of equity.

This dog is still on course for bankruptcy, but the Wall Street shysters don’t care about facts. They have a recovery story to sell to the muppets. JC Penney is back baby!!!!! But buy buy.

JCP’s Quarter In Charts: Retailer Generates Least Amount Of Cash Flow In Holiday Quarter In Recent History

Tyler Durden's picture

Moments ago JCP did what it does best: released results that missed expectations, with Revenues in the traditionally strongest, holiday (Q4) quarter of $3.78 billion below the $3.86 billion expected, and comp sales up 2.0% below the 2.1% expected. Additionally, the company’s profit margin was 28.4%, the second lowest in recent history, and only better than the 23.8% posted a year ago when the company was openly imploding. But the red flag was Free Cash Flow, driven entirely by inventory liquidation, was $246 million: the lowest such amount for the holiday quarter also in history. Whether or not this miss was not quite as bad as a worst case miss could be, whatever that means, is unclear but for now the traditional post-earning squeeze has pushed the stock higher. How long this particular squeeze persists is unclear, but likely depends on the longer-term viability of the company, and recent trends. To determine what these are, here are some charts showing how the company has performed in recent years.

First, here is JCP’s all important Free Cash Flow. While in Q4 JCP generated a little over $200 million in cash, it is the next three quarters that matter, as this is when the company burned the bulk of its cash. As a reference point: last year, in the Q1-Q3 period, JCP burned $3 billion.


JCP better not intend on burning $3 billion this year too. Why? Because as it reported, it expects its liquidity “to be in excess of $2 billion at year-end.” Really? How? Because that inventory build and $2-3 billion cash need will hardly grow on trees.

Next, we look at revenue: while this missed as we noted above, it was the only bright spot in the earnings report – the good news: it wasn’t an all out crash, even if like FCF, it was the lowest revenue for the holiday quarter in recent history.


Next, and perhaps most troubling, was the reason for the company’s subar free cash flow creation: in a nutshell, the company did not sell nearly enough inventory in the quarter. As the following chart shows, JCP liquidated, and thus generated “only” $812 million in inventory cash in the quarter: in prior years this number was always greater than $1 billion. This likely means even greater mark downs in coming quarters as JCP scrambles to dump even staler products.


Last and almost least, was JCP’s profit margin in the quarter. Surprisingly, it was a substantial 28.4%. Why? See the chart above – the company opted to not liquidate stale inventory and pull  margins down even lower. This was “good” for the profit margin, but bad for cash flow creation, and even worse for future quarter margins.

Finally, the cherry on top in the newsflow had nothing to do with JCP per se, but with the SEC: as readers will recall, it was back on September 26 when the company announced on CNBC it would not do a follow on offering only to announce, a few hours later, that it was doing precisely such a follow on equity offering. We were disgusted and appalled. We are more disgusted and appalled by the SEC which has announced the following:


And that, in a nutshell, is all you need to know about our criminal markets.


  1. When Monkey Wards went out of business years ago they neglected to ever bill me for a dining room set. Maybe it’s time to buy big tickets items from JC Penney on layaway – if they have any big ticket items. They can forget to bill me, and I can forget to remind them. The dining room set from Monkey Wards was really a piece of crap and their stoner delivery guys dropped one of the chairs down my front steps (after having missed several delivery appointments) , so I figured I deserved the dining room set for free anyway. If they close our local Penneys, the national unemployment rate for Somali Americans will go up appreciably, and the Mexicans will have to shop at Marshalls instead – although I don’t know how you could possibly fit any more Mexicans in Marshalls.


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