There's no reason for J.C. Penney to exist

While the retailer may have saved itself and its workers' jobs, it's now just one more hurdle in the race to get a lower P/E.

By Jim Cramer Aug 15, 2014 12:35PM

Customers walk into a JCPenney store in Daly City, Calif. © Justin Sullivan/Getty ImagesWhat really happened at J.C. Penney (JCP)? It went back to being a company that will stay in business for some time and do OK. In retail that, frankly, is monumental.


I have never seen a retailer come back from down 30 percent comps. It is a testament to two things: one, how unbelievably horrible previous management was, and two, the board caught it soon enough that it was able to save the day.


Now, here's the issue facing Penney and all retailers, for that matter: relevance, as in, raison d'etre relevance.


TheStreet.com logoIf you step back and look at the landscape, you have to ask yourself, other than for the 110,000 people who work at Penney, why do we need it? In fact, the chief reason we, in this country, need Penney is kind of like why we need a government works program. We want people put in productive roles so they can lead good lives and put dinner on the table.


But one thing is for certain, we don't need Penney as a place to shop. What we learned from the downturn, and what the company must still battle from here, is that we could have gotten along just fine with or without JCP. Its customers rapidly found other places to go, notably Macy's (M) and TJX (TJX). There were no outpourings of "I want my J.C. Penney because it is the only place I can get my (blank)." There was no sentimentality about it. Just a grudging recognition that the brand was so tenuous that some rockhead could almost destroy it in 18 months.


I think we have to recognize that generationally we have gotten past the mall.


There are four generational reasons:

  1. Our kids don't have as much money as we do, because job growth and job wage growth are anemic so shopping is per se punitive.
  2. We are much more profligate than our kids because we make more money, but we are getting older and we don't feel like spending what we have left if we can avoid it.
  3. Technology makes it so we don't have to get into our cars and find a spot and walk past stores we don't want to get to in order to get to the store that we want to get to, which may not have what we need anyway.
  4. Price discovery via cellphone has eliminated the ability for any retailer to mark up anything outrageously without being found out immediately as an outlier. So much of retail is commodity.

In that setup, where is J.C. Penney? Let's see.


First, it caters to the older demo that is now past its peak earning years and wants to save. Second, our kids think it is our store and they want nothing to do with where we want to shop. Three, it's in the mall that we no longer want to go to, and four, it has nothing at all that is proprietary that can't be bought on the Web using Amazon.


If there is an edge, it is the ease with which you can try things on and return them. But the younger generation now knows its sizes and is comfortable returning packages in a way that befuddles the older folks.      


So JCP hangs on and does what it does for the U.S. economy and helps keep prices down and contributes to the promotional aspects of retail.


So I say welcome back, J.C. Penney. The jobs have been saved! But retail? Penney is now just one more hurdle in the race to get a lower P/E for the entire group.


Jim Cramer headshot


Jim Cramer's Action Alerts Plus: Check out this charitable trust portfolio for the stocks Cramer thinks could be winners.





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332Comments
Aug 15, 2014 12:56PM
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Cramer - by this rationale why do you exist?   You provide nothing that cannot be found on the internet ! Your advice has been proven over the years to be worthless and in many cases actually dangerous.

Your action alerts funds which costs $700 a year to subscribe to has produced negligible results even though you started at a post 9/11 market low.

You even have the same initials as Penney"s 

So "JC"  cramer - who do you exist as a market guru?  
Aug 15, 2014 1:03PM
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JCP is a middle-class establishment.  The decline of JCP is only a mirror of the decline of the middle class.
Aug 15, 2014 12:59PM
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Why, in the name of heaven do we need Cramer.
Aug 15, 2014 12:59PM
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I would hate to see JC Penneys go. They are always having great sales on men's clothing. I hope they stick around. Its one of the few brick and mortar stores I go to.
Aug 15, 2014 1:21PM
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Frankly, the reason I DO go to JCP is because no one else is!!!  I can linger over the clothing making my choices slowly and comparing styles without someone walking in front of me or grabbing across

me;  I can find a dressing room without standing in line;  I don't have to deal with someone's kids

running thru the racks or wiping their unwashed hands on the clothes;  and in most cases, I can find

a clerk who knows their merchandise and is willing to help you!!!!!!!   I wouldn't walk into a Walmart

or most other 'discount' stores for the above reasons.. and I'm willing to pay the SMALL price difference to not deal with them.  An added bonus is when JCP has a sale.  And.. I even get a coupon to spend for my buying based on prior purchases!   Middle class?  I'm thinking 'Smart Class'.

Aug 15, 2014 1:08PM
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I do not agree.  I have consistent success shopping at JCP.  They have what I want and need.  I get in and out quickly, with excellent service from the staff.  When they do not stock what I want, it is available from their internet warehouse, delivered to the store or my home.  Amazon for clothes is not reliable,  I have ordered clothes from Amazon and sizes have not been correct, creating a big hassle.
Aug 15, 2014 1:05PM
Aug 15, 2014 1:43PM
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JC Penney is the traditional  "department store" like Macy's, but a little less expensive.  I can always find things at Penney's that I can't find anywhere else.  For example, basic men's clothing, basic children's clothing, household goods, linens,  window fashions, etc.   If you're a loyal customer, they're always running promotions/sales that are genuinely good.  The flirtation with the new "Apple" kind of store was what drove customers away.  It seemed like it was all about presentation.  I spent an afternoon in the store trying to find something to spend a credit balance on, and couldn't find anything.  I welcome their return to their roots.

Just because Cramer wouldn't shop there doesn't mean the rest of us won't.

Aug 15, 2014 1:09PM
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Get Over it Kramer as much of your Talk is based on BS and many of your recommendation have Failed!
Aug 15, 2014 1:04PM
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Why do we need Apple stores?  So you can go in and see a dumb phone first hand and then impulsively buy it!  Same goes for JCP, you go and find the cargo shorts on sale for $14.99 that you saw somewhere for $34 or more.  Guess what,  you buy them because JCP discounts heavily.
Aug 15, 2014 1:33PM
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Actually......rather than JC Penny...I would like to ask Jim Kramer why do we need you?


seriously...back when people cared about what you said, and for God knows what reason...people believed your silly show with honking horns and bells.........but you never saw the markets collapsing...and for that, you really have no excuse...  although you tried.


Why Jim Kramer...do we need you?  you are just another talking head on tv and the web..spouting the same old crap.


I'll take JC Penny over your old and tired game any day.

Aug 15, 2014 12:58PM
Aug 15, 2014 1:27PM
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Really?  When JCP was in trouble that is all everyone in our community talked about, whether they anchor a mall or have a separate store-most of our school shopping, Christmas shopping, fun shopping for ourselves and our kids is at Penneys--so you may want to step off your computer screnn and realize how beloved the franchise is to many, and thank God they are doing ok.
Aug 15, 2014 1:45PM
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PENNEYS SURVIVES THRU HAVING GOOD QUALITY CLOTHES AT REASONABLE PRICES--BESIDES I LIKE JUST HAVING THEM AND SEARS AROUND-----
Aug 15, 2014 1:47PM
Aug 15, 2014 1:45PM
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I now know to never read anything that Cramer has to say. Nothing he stated makes sense.

JCP exists because sensible people shop there!

Aug 15, 2014 3:05PM
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I bought a new mattress at JC Penney last week.  Had a kind and knowledgeable salesman and got a great sale price.  Also found two cute tops while I was there that were also a great price.  Love their bedding and housewares departments as well. Great quality shoes. Most of all fair prices. I hope they never go away.
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Call me old school but I like to feel the clothes I buy before I buy them. I am going to be wearing them for a while and if they are scratchy or feel horrible I will have just thrown my money away.

also clothes are no longer made to sizes. Some large shirts are XL in size and some XL shirts are medium. Shoes are worse I need wide shoes but at stores shoes that are marked 4E have the same footprint as shoes marked 4D. In a store I can tell if something will fit or not.

Buying Online I am at a loss until the item gets to me as to if it feels good or is even the same size. And I am a guy. Imagine those females shopping online and find out the cut of the clothes make them appear to be sexless lumps of clothes instead of sexy??? I would imagine half the clothes brought online by women are returned.

I am glad JPC could turn itself around and make a go of things.

Pretty much they were probably down as they abandoned their mall stores and had to rebuild new independent stores and now that that is out of way JPC is showing profit once again.

            

Aug 15, 2014 1:04PM
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JCPennys got away from what made JCPennys in the first place, same with Sears.
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