Penney's home office. Image source: J.C. Penney.
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The retail business has changed dramatically over the past 20 years, and those changes have proven challenging for J.C. Penney (NYSE: JCP) to navigate. The discount retail chain has gone through periods of intense struggles, and its efforts to reinvent itself largely resulted in J.C. Penney having to go back to its roots and embrace the strategy that had brought it past success. Yet investors have waited more than 20 years since the last time that a Penney stock split happened, and some wonder whether the stock will ever recover enough to make a future split likely. Below, we'll look more closely at the history of J.C. Penney's stock splits to see what it would take to bring a future move in the same direction.
J.C. Penney stock splits
Here are the dates and split ratios for the stock splits that J.C. Penney has done in the past:
Data source: J.C. Penney investor relations.
As you can see, it's been quite a while since J.C. Penney had the occasion to do a stock split. Given that the stock has only barely eked out a positive average annual return over the past 30 years, it shouldn't come as a big surprise that it's been so long since the last Penney stock split.
When J.C. Penney historically did stock splits
J.C. Penney's history of stock splits looks similar to the decision-making process that many of its peers throughout the stock market used to follow. In 1987, J.C. Penney shares climbed above the $100 mark, and a couple months later, the retailer implemented its first-ever stock split. The result of that move was to send the stock price back down to about $50. Given the proximity of the move immediately before the 1987 stock market crash, it took a while for Penney shares to start climbing again.
Nevertheless, by 1993, Penney had once again benefited from a favorable economic environment. The company didn't wait as long as it had in its previous stock split decision, implementing another 2-for-1 split after shares hit $90.
When Penney started hitting the skids
After its second split, Penney kept performing well. Yet one reason that its stock price didn't climb as fast was that Penney had an impressive dividend yield of more than 4% throughout several of the years following the 1993 stock split. By 1998, though, the stock had nevertheless climbed to almost $80 per share, and some might have expected another split.
Yet what set in motion the first phase of J.C. Penney's decline was its purchase of drugstore Eckerd in late 1996. Running a drugstore eventually made up nearly half of its annual revenue, but it also distracted Penney from its core business of running its department store operations. By 2004, Penney had decided to sell off Eckerd, and it took a charge of more than $1 billion in connection with the move. The stock fell into the single digits in 2000 and didn't start to recover markedly until after it became clear that Penney would move on without Eckerd.
Why J.C. Penney hasn't split
Subsequently, Penney stock climbed back into the $80s by 2007, and it was conceivable that the retailer could have considered a split at that point. Yet the end of the oil boom seemed to hit Penney harder than some of its peers, and shares started moving downward.
Then, Penney had to deal with the 2008 financial crisis. Facing competitive pressure in the discount retail market, Penney hired new executives to try to make a transition away from its discount model toward a business model that relied less on promotional activity. That move backfired, and Penney ended up having to bring back former executives in order to avoid even bigger problems. Now, the retailer's shares have traded near or below $10 for most of the past three years, and there's little relief in sight given a tough retail environment.
Will Penney ever split again?
Penney is unlikely to split again in the near future. Even a full rebound would likely leave Penney shares well short of triple-digit levels, and such a recovery is far from assured. Penney has had some successes lately, especially with some in-store concepts like its partnership with Sephora. However, the retailer is far from having recaptured its former glory.
Given enough time, Penney shareholders might get a stock split. Given the current state of the retailer, however, it seems likely that some other corporate action will happen long before anyone starts thinking about a Penney stock split.
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