JCPenney's Response To Panic: No Soap

Things may actually be getting better at JCPenney (NYSE:JCP), but it's hard to tell as the struggling department-store chain seems surrounded by a series of soap-operas.

On Wednesday (Sept. 25), a New York judge once again delayed a decision on whether Macy's (NYSE:M) or JCPenney can stock merchandise from Martha Stewart (NYSE:MSO), even though Penney's has apparently decided it doesn't want Martha anymore, according to the New York Post. Also on Wednesday, a Goldman Sachs analyst said she feared Penney's was running out of money and might end the year bankrupt (and presumably, according to the standard soap-opera script, with a drinking problem). Even the loose ends of the jilted Bill Ackman storyline are still wrapping up.

But on Thursday, the chain responded: No, it's not running out of money. It doesn't see a situation in which it will need to borrow more. Online sales are showing double-digit gains. And in-store sales are improving and expected to get better, mainly because the chain has key items back in stock and sizes that its shoppers are looking for.

In other words, there's actually a reason for Penney's traditional customers to come back into its stores, after the Herculean effort to drive them away under ex-CEO Ron Johnson.

Yes, that explanation is getting old. But the reality is that Johnson's grand plan to replace all of Penney's customers and product lines, rebuild its stores, and do all that without borrowing any money or carefully vetting whether some of it was legal turned out to be hugely expensive. It also took 15 months from the time Johnson unveiled his plan until he was fired, having destroyed a quarter of Penney's sales volume, botched the store remodels, made contractual promises he couldn't keep to vendors and contractors, and run up unpaid bills that are still cropping up.

In about one-third of that time since Johnson was fired, Penney's has apparently managed to end the freefall, take out the trash and begin untangling the mess. That's not nearly so entertaining as the soap operas, especially since returning to "business as usual" is the actual goal. But we're pretty sure how JCPenney is actually doing will end up being a lot more interesting to everyone else in retail.

For more:

- See this Associated Press story
- See this New York Post story

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