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Investors Sour on JCP Turnaround Plan

JC Penney’s stock price took another big dip on Monday, falling 13% after the company announced a dismal loss of $123 million in Q3. Revenue fell almost 27% to $2.93 billion – much worse than analysts’ estimate of $3.27 billion. On Friday, S&P moved to drop Penney’s credit rating – already at junk status – even lower. It was the third quarter of big losses and sales declines, following CEO Ron Johnson’s decision to abandon sales and discounting in favor of daily low prices.

Investors were initially enthusiastic about the sales move, driving Penney’s stock to about $43 a share in January and February. The abysmal consumer response has soured that initial reaction however, and the stock is now trading at around $18, trending lower.

Executives assured investors that the company has the money to continue with Johnson’s turnaround plan, which also includes revamped stores and strong partnerships with brands and designers, including Levi’s and Joe Fresh.

The pricing plan replaced over 600 sales and coupons offered throughout the year with a three-tier strategy that lowered prices on all items by 40%, put month-long deep discounts on select merchandise, and added clearance events. Consumers have abandoned the store in droves. Revenue at stores open at least a year have fallen by 26% in the last quarter, on top of two consecutive prior quarters of losses.

The losses mean Penney’s has more than normal riding on this year’s holiday season. The company is planning gimmicks and its only sale of the year on Black Friday.

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