Why J.C. Penney Stock Fell 30% in March

MarketsMotley Fool

What happened

Department store chain J.C. Penney (NYSE: JCP) dropped 30% last month, compared to a 3% decrease in the S&P 500, according to data provided by S&P Global Market Intelligence.

Continue Reading Below

That decline led to a new low for the stock, which is down over 90% in the past decade.

So what

March's slump came despite encouraging operating news from the retailer. After declining in each of the prior three quarters, fourth-quarter sales rose by nearly 3%, executives revealed on March 2. And improving gross profit margin helped net income jump to $254 million from $192 million a year ago.

However, cash balances fell to below $350 million from $762 million over the holidays, which highlighted the growing pressure on J.C. Penney to engineer a turnaround before a liquidity crisis hits the company.

Now what

Shortly after its earnings report, the retailer announced another trip into the debt market by taking out $400 million of loans at the steep annual interest rate of 8.63%.

These borrowings will buy J.C. Penney time to allow its rebound plan to play out. However, investors were likely hoping their company wouldn't need to resort to such aggressive measures to keep its operations running.

10 stocks we like better than J.C. PenneyWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and J.C. Penney wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of April 2, 2018

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.