More bad news for JC Penney

J.C. Penney

On Friday, UBS analyst Michael Binett downsized his forecast for Penney's fourth quarter and told Reuters he expects same-store sales to decline 28% after originally projecting a 20% drop. The New York Post piled on, saying that sources close to JCPenney told the paper that same-store sales were down more than 30% throughout the holiday season.

That's sent J.C. Penney shares plummeting nearly 8% in the last five days and continued the company's nearly 58% slide since February 2012. That was just after the company announced across-the-board price cuts and its intent to divide its nearly 700 large stores into a series of mini shops for brands like Martha Stewart, Izod, Liz Claiborne and others.

Unfortunately for J.C. Penney and chief executive Ron Johnson, a former Apple (AAPL) and Target (TGT) exec, consumers don't seem to think much of the company's strategy. Same-store sales were down 26% in the third quarter and Johnson abandoned his own limited-discounting policy for Black Friday deals and a recent spate of 20% to 50% price cuts aimed at reducing inventory.

Even Johnson realizes that changing customer tastes will require J.C. Penney to sell more products by designers like Betsey Johnson, Nanette Lepore and Marchesa, but racks full of everyone's great aunt's favorite brass-buttoned outfits have to be cleared first. That leaves the store stuck in a retail limbo where it's trying to transition from one customer base to another, but doing little to please either in the interim.

This puts J.C. Penney dangerously close to Sears (SHLD) territory. That foundering retail chain and its Kmart holding have resorted to selling off real estate within their large stores to gyms and grocery stores just to make a few extra bucks. Successive reports of falling sales and revenue at Sears and continued selloffs of both stores and intellectual property like Craftsman tools make Sears look like a company in liquidation. Even its remaining stores haven't been spruced up in a number of years.

The difference at J.C. Penney is that it at least appears that Johnson and company are trying to save the retailer. The chain is pressing on with its mini-stores idea even as it abandons its anti-discounting stance and Johnson and others continue to invest cash and energy into the brand. With sales dropping by more than a quarter with each earnings report, however, all that effort may amount to going down swinging instead of going down looking.

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