JCPenney is firing back on bankruptcy rumors

JCPenney, the struggling American retail chain that some analysts speculate may go the way of bankrupt Sears, said Wednesday it’s too early to write its obituary.

The stock market may be bearing that out: shares, which fell below $1 on Dec. 27, were rose more than 3 percent in afternoon trading on Wednesday.

The gains follow the hiring earlier this month of two executives who will be central to the turnaround plan of CEO Jill Soltau.

However, Soltau, along with her new team, have a great deal of skepticism to overcome.

According to a Wall Street Journal report from earlier this week, the embattled retailer continues to battle declining sales and executive vacancies as it desperately tries to hang on and avoid the same fate as Sears.

What's more, earlier this month, the retailer announced plans to shutter three more stores by spring, on the heels of disappointing sales numbers during the critical holiday shopping season.

Then, a week later, the company announced a series of leadership changes, noting that searches are “well under way” for a new chief financial officer and chief merchant officer.

However, the retailer said the changes reflect the “strength and the depth” of its turnaround strategy, fending off rumors that a bankruptcy could be imminent.

In a statement to FOX Business, a JCPenney spokesperson said it is "misleading to say that [it's] struggling to avoid bankruptcy and it's an irresponsible assumption that executive vacancies somehow translates to our inability to operate our business."

The company added that it expects to end the year with well over $2 billion in liquidity and noted that it exceeded market expectations on earnings per share in the third quarter.

Yet again, Fitch Ratings Inc. last week downgraded the retailer’s debt one notch closer to junk and its shares, which previously soared as high as $80 during the recession, are now hovering slightly above $1.

"Despite previous downgrades, the credit rating agencies have maintained their highest liquidity rating for JCPenney," the spokesperson added.

However, Marc Rudov, a branding adviser, said the departure of Marvin Ellison -- the former CEO -- last May was extremely telling in regards to the retailer’s future.

“Managerially, he had checked out long before then: the stores had become dirty and unorganized, littered with merchandise on the floor. The sales ‘help’ were notably lost, overburdened and unhelpful. If a retail store is nothing more than a glorified warehouse, Amazon will destroy it, and rightfully so,” Rudov said.

Mark Cohen, director of retail studies at Columbia Business School, told the Journal that JCPenney is a “broken business” and that “they are looking at a very problematic 2019.”

“It’s the mistakes of the past coming home to roost,” he said.

Bob Phibbs, CEO of New York-based consultancy firm The Retail Doctor, told FOX Business that the biggest problem the retailer has is that it doesn’t “know who their customer is.”

“[It] hasn’t since Ron Johnson (the retailer’s former CEO) tried and failed to reinvent the brand. They need to own that their customers tend to live in rural areas. That means stopping their unsuccessful attempts to compete with hot brands with a big presence, such as Target,” Phibbs said.

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He noted that JCPenney needs to create a plan if it wants to survive -- if not, it will be in the same place that Sears was in not long ago.

“If JCPenney wants to avoid the same fate, they need to cut their store footprint and find their customer again.”

This story was updated on Jan. 23.