J.C. Penney to file for bankruptcy as soon as next week

[Steve]

Regency is also facing the issue of the disposable income around the mall. It isn't good compared to The Avenues or St John's Town Center. Combined that with the fact that Aeropostale or Old Navy or whoever just doesn't need 4-5 stores in the Jacksonville market and you see who's on the copping block.

In a lot of ways River City Marketplace has picked up SOME of that, as it provides a shopping opportunity for folks on the northside and north of town, versus driving all the way to St John's Town Center. It's also hurt regency a bit too.

I think the residential in the immediate vicinity (or above the store) certainly helps, but large regional centers need more than that. For example, residential came online at Town Center a while after the place was open and a success. Now, some of that is related to the fact that retail in 2005 was much different than today. But, along Town Center Parkway, how many apartments or condos are there really? A couple thousand? You need a lot more than that to sustain the stores at Town Center.

Now, related to density and cost to develop: Notice there ae (comparatively) very few parking garages at Town Center. A parking garage is about 20k a space. Especially in 2005, land was comparatively cheap around there. If you go up with residential, you'll likely need to go up with parking. There isn't enough incentive to cram it all in densely.

This is a longer conversation, but I think we could see a time where (believe it or not), the inside of parking at Town Center becomes timed parking.

(insert audible gasp).

Seriously. When it comes to Buy Online Pickup In Store (BOPIS/BOPUS depending on who you ask), people don't need to be there for long.

[jaxlongtimer]

This is a longer conversation, but I think we could see a time where (believe it or not), the inside of parking at Town Center becomes timed parking.
(insert audible gasp)

Your nightmare has arrived already.  Town Center has had, for some time now, privately run metered parking spaces in select spots such as the space around the end with Capital Grill and Nordstroms.

[Steve]

This is a longer conversation, but I think we could see a time where (believe it or not), the inside of parking at Town Center becomes timed parking.
(insert audible gasp)

Your nightmare has arrived already.  Town Center has had, for some time now, privately run metered parking spaces in select spots such as the space around the end with Capital Grill and Nordstroms.

Yea, I've seen that. It's (as a percentage) a pretty small number of spots.

And to be clear-I think it would be a good idea. Personally I never park in the center strip. It's just easier to park further away and walk versus circling 5 times.

[bl8jaxnative]

[quote author=Steve link=topic=36214.msg502108#msg502108 date=1589219208

JCPenny is in a MUCH worse hole now because yea Johnson tried....but he also burned through many Dubloons doing it. Now, there aren't many Dubloons left to invest in yourself.
[/quote]


I don't disagree with the spending.  I think where we differ is how much to attribute it to Johnson.  Well that me not doing this much.  So I appreciate the feedback.

I don't the JCP had a choice; it was do or die.  That was known then.  The investors that bought up JCP could see their performance was crap & worth the gamble.

And while they burned through some cash, johnson's share reign didn't rack up debt.  That happened after when JCP returned to their failed biz model.

Maybe this is what sticks in my craw.   JCP returns to a model that wasn't working at a time when everyone is changing how they do retail.   They get a couple stories - ones I consider bullshit - trumpeting a revival at a me when their sales / sq foot was dangerously fallling.  Great example, IMHO, of the power of PR and how desperate the press is for a story that sells.

I don't mean to cherry pick nor this be anything complete.  but here's a few bits from JCP 10Ks.   What's really tellling that I don't include is that free cash flow goes to shit in 2013.  WHY?  That's not Johnson's doing and they rack up a lot of debt because of it.

At the core Johnson wasn't around long enough to do damage.  The damage was returning to a business model that no one that would work in the long run.  Now maybe that's a responsible thing to do for investors.  Maybe their job isn't to keep the thing alive, but to ensure some returns.  After all it ain't easy to turn anything around. 


------------------
don't mean this bit to be cherry picking.  just trying to quickly share some of the basic metrics in play.
------


2009
Since our founding by James Cash Penney in 1902, we have grown to be a major retailer, operating 1,108 JCPenney department stores in 49 states and Puerto Rico as of January 30, 2010.

Long-term debt, including current maturities
    2009 - 3,392                    2008-3,505                2007-3,708                2006-3,444      2005 -3,465    

2012
operating 1,104 department stores in 49 states and Puerto Rico as of February 2, 2013.
s of March 5, 2013, approximately $2.868 billion of long-term debt was outstanding under the Company's indentures.

Long-term debt, including capital leases, note payable and current maturities
2012-  2,982     2011-3,102      2010-3,099      2009-3,392     

2015
Sales per net selling square foot(2)
2015 -$165
2014-$   155
2013 $147
2012 -$161
2011 - $212


2020
Since our founding by James Cash Penney in 1902, we have grown to be a major retailer, operating 846 department stores in 49 states and Puerto Rico as of February 1, 2020.

Total debt (6)
2019-3,721   2018-3,808  2017-4,012 2016-4,602   2015-4,769

Total net sales
2019- $10,716   2018 $-11,664  2017-$12,554  2016-$12,571    2015-$12,625
   


   

[bl8jaxnative]

BTW - I haven't checked into Best Buy much.  I suspect there a lot of their turnaround story is genuine.   But keep in mind that some of it is "not dead yet".  Now that's a bit of an accomplishment on it's own.  But their sales, IIRC, haven't' grown in the last decade.

One flag for me is that they've taken on a ton of debt the last few years.  IIRC they've got $3B or maybe even more than $4B?  It's up there. 

I'm not sure what they've done with the debt.  Building out logistics?  Stock buy backs?  Either way a few years ago they would've been golden to ride out a retail apocalypse.  $4B in debt may be manageable with $40B in revenue.  But with $30B?  $19B?

[Lostwave]

Another thing that helped Best Buy is they outlasted all their brick and mortal competition.  They are all that's left.  (Besides Fry's and Microcenter and the like which aren't direct competition and aren't in most markets)

[Steve]

BTW - I haven't checked into Best Buy much.  I suspect there a lot of their turnaround story is genuine.   But keep in mind that some of it is "not dead yet".  Now that's a bit of an accomplishment on it's own.  But their sales, IIRC, haven't' grown in the last decade.

FY15: $39.5B
FY16: $39.4B
FY17: $42.1B
FY18: $42.8B
FY19: $43.6B

For a retail company well into 11 figures, that's actually nice top line growth. Profit is good story too:
FY15: $9.1B
FY16: $9.4B
FY17: $9.8B
FY18: $9.9B
FY19: $10.0B

EPS has steadily risen as well so the total number of shares outstanding I'm guessing is somewhat flat. I couldn't quickly find that number.

One flag for me is that they've taken on a ton of debt the last few years.  IIRC they've got $3B or maybe even more than $4B?  It's up there. 

I'm not sure what they've done with the debt.  Building out logistics?  Stock buy backs?  Either way a few years ago they would've been golden to ride out a retail apocalypse.  $4B in debt may be manageable with $40B in revenue.  But with $30B?  $19B?

Short Term Debt has been $0 back to FY15. Total Debt has actually dropped from $1.7B in FY15 to $1.27 in FY19. Their Total Liabilities did rise from $9.6B to $12.1B over the last Fiscal Year. Now, Liabilities is different then Debt on the balance sheet (though I'm not a finance guy and I don't remember all of the differences between the two, and maybe they're hiding some bad financial data somewhere.

Source on all of this is Reuters:
https://www.reuters.com/companies/BBY/financials/balance-sheet-annual

Recently it appears CEO Corie Barry agreed to take on some more liabilities. Why? I don't remember and I'd have to dig their annual report back up to see if I could figure it out. Their total Liabilities was relatively flat until last year. Now, could that be a bad decision? Maybe, time will tell.

The point is, they completed the turnaround and they proved they could compete against Amazon in their space and more than hold their own. That alone was something I never thought they could do, mostly because I doubted their ability to lower COGS.

[Steve]

Another thing that helped Best Buy is they outlasted all their brick and mortal competition.  They are all that's left.  (Besides Fry's and Microcenter and the like which aren't direct competition and aren't in most markets)

It absolutely helped, no doubt. Circuit City and Sound Advice were gone prior to their turnaround.

[marcuscnelson]

This is probably a really dumb question, but if Best Buy is making $9-10 billion in profit every year for 5 years running, why don't they just use some of that profit to pay off their debt? Or is this like the national debt where it doesn't matter that much?

[Steve]

This is probably a really dumb question, but if Best Buy is making $9-10 billion in profit every year for 5 years running, why don't they just use some of that profit to pay off their debt? Or is this like the national debt where it doesn't matter that much?

The Debt definitely does matter - just ask any retailer that's filed Chapter 11 or liquidated. Similar to consumer debt, the mere presence of debt isn't by itself bad but mismanagement or taking on too much can get you in trouble.

I can't speak for the exactly what Best Buy's debt represents, but retailers take on debt for a number of very common operating reasons. One reason is the fact that their sales aren't proportional across all 12 months, and they have to make purchases of goods in January for purchases throughout the year including during the busy November-December times. It's very common for November and December to be 2/3 of a retailer's annual or more - I spent almost 12 years at an EXTREMELY seasonal online retailer. Since you don't have the cash to make that purchase yet, retailers will often make those purchases on credit. Obviously in January there are the sales that just came in during Q4, but retailers do have to spend money on things that aren't people or goods to sell.

The ideal is that at the end of the holiday season the retailer can pay off their debt then start fresh for the next year. That could be what Best Buy is doing, but without diving into detail I have no idea.

[thelakelander]

Today may be the day 200 of its 846 stores are expected to be closed:

https://www.dailymail.co.uk/news/article-8322275/JC-Penney-plans-file-bankruptcy-today.html

I see they've decided to reopen the Avenues store but not Orange Park and Regency this week:

https://www.jaxdailyrecord.com/article/j-c-penney-to-reopen-at-the-avenues-on-may-13

I wonder is that a sign to come?

[vicupstate]

Today may be the day 200 of its 846 stores are expected to be closed:

https://www.dailymail.co.uk/news/article-8322275/JC-Penney-plans-file-bankruptcy-today.html

I see they've decided to reopen the Avenues store but not Orange Park and Regency this week:

https://www.jaxdailyrecord.com/article/j-c-penney-to-reopen-at-the-avenues-on-may-13

I wonder is that a sign to come?

It would be hard to see them leaving JAX completely, and Regency is a no-brainer to close.

[Megabox]

JCPenney has filed for bankruptcy and will close some stores. Don't know if any of the three Jacksonville area locations will be affected. The one at Regency Square, the one at the Avenues, and the one at the Orange Park Mall.

[jaxlongtimer]

Oddsmakers don't seem to be giving Penney's much of a chance unfortunately.  Penney's is already highly leveraged, has an outdated. stale and very weak brand image and has no remaining resources to realistically catch back up to Walmart, Target, Amazon, Costco, etc.

It's another example of a great American company (118 years old) being run into the ground by greedy private equity firms.  In the case of retailers, they have leveraged these firms to the hilt on the backs of the retailers' real estate holdings and favorable leases leaving no margin for error in operations.  Hit a deep recession, an epidemic or just the need to reinvest capital into updating the business model vs. leveraging the firms to enable paying out fat dividends, fees and stock buybacks and you get what you are seeing nowadays.  Neiman Marcus, J Crew, Sears-kmart, Penneys, etc. & more to come.

The #1 thing you see most of the great tech companies doing is accumulating massive capital (tens to hundreds of billions in hard cash reserves) vs. significant payouts to shareholders in relation to their profits and accumulated equity.  Its what is enabling them to stay cutting edge year after year and expand into new ventures.  And, not one of them is mentioned in the same breath as bankruptcy.  More businesses should move in this direction and this epidemic may force their hands - if they survive long enough to do so.

[bl8jaxnative]

Which private equity firm has ran JC Penney into the ground?