It is not very clear (or may be it is) what has gone wrong with JC Penney; for its market value has dropped southwards with some speed.
From $9 b in Sept-2008 and again in Feb-2012, now it is worth $2.8 b. You can keep waiting, but it might look longer.
Of course, a few things went wrong: Lower revenues and operating losses, poor management of cash, and the fighting management. Instead of looking at ways to improve the business performance, the fight is on with pointed fingers.
JCP's capital has reduced from $10 b in 2003 to $6.5 b in May-2013; its cash has reduced from $3 b to $0.8 b. The business earned about $3.6 b during the period, paid dividends of about $1.4 b and bought back its stock for about $5.5 b. Now, its debt stands at $3.7 b.
One of the rudest ironies - call it error of judgement - its stock buybacks were made at the wrong time. Of course, it is visible for us with the advantage of hindsight.
The firm bought its shares back worth about $1.6 b in 2004 and $2 b in 2005; it couldn't be below $35 per share (see above), probably more. It bought back again in 2006 and 2007. It also bought back about $0.9 b in 2011, again probably for about $35 per share. In all, approximately $5.5 b was spent on buybacks, which unfortunately, did not work.
Stock buybacks are good when the stock is purchased at less than the intrinsic value of the equity; these should be done only with excess cash. Otherwise, the cash spent would cost the shareholders heavy, which it did apparently. See the stock price now at $13 per share.
The times aren't good it seems. Is the turnaround possible with a different CEO now? Time will tell.
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