J.C. Penney and Sears both face financial woes

J.C. Penney and Sears both face financial woesExperts say J.C. Penney and Sears are both being viewed as doomed right now. Some experts are just waiting to see which will file bankruptcy first leaving investors in the hole.

Sears has been marking up hundreds of million in losses each quarter, with shares down about 50 percent from its highs in 2010. Recently, it experienced a short squeeze that shot stocks up $20 to reach $60 each because of the hope of unlocking some value in the company’s real estate holdings.

J.C. Penney has seen its stock drop 70 percent from its 2012 high that was based on Ron Johnson optimism. The former Apple executive failed to perform though, leaving the company in even worse condition.  Now that he is gone, the company is back under the leadership of Mike Ullman. Ullman previously didn’t fare well at the helm of the company, but apparently the board felt he did better than Johnson. Actually, Ullman is blamed for the company’s troubles starting.

Both clothing retailers are expected to go farther in the red the remainder of this year and in the next two years. Both have CCC+ ratings from S&P. Looking at each separately, J.C. Penney has $5.8 billion in debt with total liabilities of $9.3 billion and a market cap of $3 billion. Total assets are $11.6 billion, so it has 25 percent more in assets than obligations.

Sears has total debts of $3.7 billion and liabilities of $16.9 billion. The company has a market capitalization of $6.3 billion and has less debt than market value, which makes it in a better financial setting than J.C. Penney. Sears only has total assets that are valued at $19.3 billion, which is 14 percent more than its standing obligations, so in that aspect, it has a slimmer margin than J.C. Penney.

With both retailers having more assets than liabilities, there is no clear imminent threat of bankruptcy, according to experts. Shareholders in either company shouldn’t expect to see profits for the next two or three years at least, but under the right leadership, and with the right plan of action, there could be a light at the end of the tunnel for both companies.

While Sears and J.C. Penney are not raking in money right now, they can rebound. Both have been around for decades, so it is not likely the board members are willing to give up just yet.

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About the author

Rob is a analyst and reporter covering stocks and business news.