Penney's Troubles Are Clear as Day

 | Sep 25, 2013 | 11:23 AM EDT
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Vornado (VNO) and Bill Ackman may not have timed their buys right for J.C. Penney (JCP), but it does look like the company's sales aren't so terrible. Today the stock's really breaking down -- and, more important, the preferred is being hammered. This means the situation may call for a raising of more cash, somehow, in order to shore up the situation.

People want to know what's ailing J.C. Penney now. I think the answer is pretty clear from looking at all of the retailers: J.C. Penney sells apparel, and apparel sales are horrendous right now. The company's chief competitor, Macy's (M), which goes head to head with J.C. Penney, keeps having numbers trimmed on the basis of apparel. PVH (PVH), which is an excellent apparel company, has said that September started off weak after a bummer of a summer. Nordstrom (JWN) has indicated that apparel sales aren't strong. Even J. Crew, the best merchant out there, is having a hard time.

So what does Penney have to offer? There had been plans by former CEO Ron Johnson to really set the world on fire with housewares, but that's been stillborn, a function of the Martha Stewart (MSO) fracas with Macy's as well as too-high-a-price point merchandise for Penney shoppers. That puts even more emphasis on apparel.

Given that most of the buyers on these blocks seem like nontraditional retail owners, as CNBC's David Faber has said repeatedly, I can't imagine that they know anything more than we do: Business is terrible at department stores. In fact, the only apparel plays that are doing well are Ross Stores (ROST) and TJX (TJX), and those are close-out chains.

It was heartening to see that Ascena (ASNA) was able to deliver a better-than-expected quarter, but don't forget that this number was on top of a series of bad misses, so it's a heavily reduced compare.

Now, we know that Penney raised a lot of cash when Mike Ullman, the CEO, could. That was good news -- prescient, even -- kind of like what Alan Mulally did at Ford (F). That said, the suppliers watch stocks, too. If I were a supplier to J.C. Penney, I would be nervous.

Just like the holders of the stock. It all makes sense and only a better retail climate, perhaps spurred by lower gasoline prices, can get Penney going in the right direction.

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