Cramer Says J.C. Penney (JCP) Should Not Exist in Today's Retail Marketplace

November 16, 2012 7:22 AM EST
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J.C. Penney (NYSE: JCP) shares are lower even as equities virtuoso Jim Cramer lauded the potential uptick for shares moving forward late Thursday.

Just kidding, Cramer added J.C. Penney to his "Sell Block."

Timing could never be better for Cramer. Shares of J.C. Penney are at or near annual lows. Most analysts have also taken a bearish stance on the near-term outlook for the value retailer. (Click here for more analyst commentary.) The stock has dropped since CEO Ron Johnson issued ominous comments in September and have continued seeing pressure as J.C. Penney missed Q3 views not one-week ago.

Cramer noted that J.C. Penney looks appealing to investors following its recent 61 percent drop, but investors shouldn't be fooled. The stock is a value trap and indications don't point to improvement anytime soon.

The last three-quarters have seen sales decline markedly and the trend is continuing.

Cramer also pointed out how CE Ron Johnson and company don't really have a set-in-stone plan on what to do next. After eliminating coupons and seeing customers revolt, the idea has been gradually rolled back in. Store remodels are continuing and J.C. Penney has seen positive response as a result, but Cramer cautioned that the retialer might go broke trying to remodel all of its locations.

To contract his view, Cramer said bulls on the stock point to one of J.C. Penney's largest assets, it's real estate. The retailer owns about 426 of its own locations. Despite the large asset, Cramer said that there are really no buyers for stores the size of Penney, meaning that the real estate could sell for a fraction of what J.C. Penney thinks its worth.

Cramer also comments on J.C. Penney's store-within-a-store concept, saying it wouldn't work because Penney's brands are "mediocre at best."

Given it's pricing issue and "so what" brands, Cramer thinks J.C. Penney shouldn't exist in today's retail marketplace. Shares are indicated for a lower open Friday.

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