Summary
- J.C. Penney's stores are scheduled to reopen by April 2.
- There is likely to be still a significant growth in reported Coronavirus cases by then.
- Thus, J.C. Penney's store closures are likely to be extended.
- This puts it on track to generate -15% or worse comps in 2020 along with adjusted EBITDA under $300 million.
- It has a relatively small bond maturity in June 2020, but may decide to file for bankruptcy by then if its business does not recover well enough post store closures.
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The best-case scenarios for J.C. Penney (JCP) appear to be out of reach now with its store closures and the acceleration of testing revealing more of the extent of the Coronavirus issue in the United States. It will probably take at least a month for J.C. Penney's stores to re-open now, and there is a significant risk that it doesn't repay its relatively modest $105 million June 2020 debt maturity. Whether it files for bankruptcy by then or decides to try to continue on through the holiday season will likely depend on how foot traffic recovers post-store closures.
Store Closures
J.C. Penney announced that its stores and business offices were closing starting on the evening of March 18 and were scheduled to reopen April 2. That re-opening date appears to be quite optimistic now.
The reported number of Coronavirus cases is over 50,000 in the United States now, up from under 6,000 one week ago (March 17). Some of this growth in reported cases is due to the catch-up in testing as testing capacity has increased very substantially. However, based on the experiences in places like China, South Korea and Italy, the daily growth rates in the United States are still likely to remain +10% or more until at least the end of the month.
That suggests that by the time J.C. Penney plans to reopen its stores, there will likely be upwards of 150,000 confirmed cases, with the daily growth in reported cases still around 15,000 per day. Thus it seems unlikely that J.C. Penney will re-open its stores with those conditions.
Another couple weeks may reduce the growth rate to levels where store re-openings may be reconsidered, but I'd say that J.C. Penney is probably looking at four to six weeks of store closures now.
