Tag Archives: JCP credit rating

JCPenney tanks from new pro-gay policy

In November 2011, the family department store JCPenney hired a new CEO named Ronald Johnson, in a bid to reverse its declining sales. The company’s stock value started to improve, until February 2012, when Johnson initiated a new (but undeclared) pro-homosexual policy.

First, the company hired out-lesbian Ellen DeGeneris to be its public face and spokesman. Then, in its Mother’s Day and Father’s Day catalogs, JCPenney aggressively courted the LGBT “community” with ads of two mommies and of two daddies. [See my post of June 2, “Something is rotten at J C Penney.”]

The new policy has alienated Christians who still make up the majority of Americans. JCPenney’s aggressive courting of homosexuals is all the more puzzling because, according to the U.S. Census, homosexuals (same sex households) constitute less than 2% of U.S. households.

It is noteworthy that JCPenney’s stocks, which had gone up after Johnson became CEO, precipitously declined beginning precisely in February 2012, when DeGeneris became the company’s public face. Today, JCPenney’s stocks are worse than before Johnson.

Here’s JC Penney’s stock performance from May 2011 to May 2012. (Click chart to enlarge)

Note that Ron Johnson took over the company’s leadership in November 2011. JCPenney’s stock value rose to its highest in February 2012. Since then, the value systematically declined. By May 2012, JCP’s stock value was LOWER than when Johnson took over the helm!

Since May 2012, JCP’s stock value has continued to decline. Below is its stock performance for the last three months, as of Wed., July 11, 2012, 4:00 PM EDT|USD (source: Morning Star):

Yesterday came even worse news.

The credit-rating agency Standard & Poors downgraded its rating for JC Penney Co. Inc. from BB- to B+. S&P’s evaluation of JCPenney’s outlook is “Negative”.

Here’s what S&P says about JCPenney in greater detail:

J.C. Penney Co. Downgraded To ‘B+’ On Ongoing Weak Expected Performance And Credit Metrics; Outlook Negative

Publication date: 11-Jul-2012 15:31:11 EST

  • Performance at U.S. department store operator J.C. Penney remains weak, resulting in a meaningful deterioration of credit protection metrics.
  • We expect that there could be further operational issues over the next year as the company implements its new pricing and merchandising strategy.
  • We are lowering our corporate credit rating on the company to ‘B+’ from ‘BB-‘ and removing all ratings from CreditWatch with negative implications. The outlook is negative.
  • The negative rating outlook reflects our view that the new pricing and merchandise strategy will cause further disruptions to operations, and that the potential for further performance erosion remains elevated over the next few quarters.

The ratings on Penney reflect Standard & Poor’s assessment that the company’s business risk profile is “weak” and its financial risk profile is “highly leveraged.” Our business risk assessment incorporates our analysis that the department store industry is highly competitive with large, well-established participants.

“Based on this environment, it is out view that further performance difficulties may result in the loss of market share to other players, such as Macy’s, Kohl’s, Dillard’s, or other department stores or specialty retailers.”

J&P’s assigned credit ratings range from the highest to the lowest: AAA → AA → A → BBB → BB → B → CCC → CC → C → D

On its website, S&P offers this explanation of its credit rating:

A credit rating is Standard & Poor’s opinion on the general creditworthiness of an obligor, or the creditworthiness of an obligor with respect to a particular debt security or other financial obligation. Over the years credit ratings have achieved wide investor acceptance as convenient tools for differentiating credit quality.

S&P’s credit ratings can be and are used to inform investment decisions.

To compare JCPenney to two of its competitors, the most recent S&P’s rating (April 10, 2012) for Macy’s Inc is “BBB” and “Outlook STABLE”. S&P’s rating for Nordstrom is even higher: a credit rating of A- and “Outlook STABLE”.

All of which leaves the interested observer perplexed about JCPenney’s self-destructive pro-gay policy. Aren’t capitalists motivated by profit? In JCPenney’s case, the answer apparently is “No.” For Ron Johnson, who recently was rewarded for his questionable performance with a promotion from CEO to JCP’s president, political ideology clearly trumps profit.

And I will continue to boycott JCPenney!