• by Sarah Mahoney  @mahoney_sarah, January 9, 2019

With Sears hanging on by its final financial fingernail, JC Penney is finding itself in the spotlight as retail’s next sickest patient.

J. C. Penney Co., based in Plano, Tex., says comparable-store sales sank 3.5% for the nine-week holiday period, even as other stores had a booming season. It also announced three store closings, and says there will be more to come when it reports its fiscal fourth-quarter results next month.

Those declines are especially painful when most retailers had a very happy holiday, with Mastercard SpendingPulse reporting a 5.1% jump in seasonal spending. That’s a total of $850 billion — the best rise in six years.

“The biggest problem area is in apparel, where JCPenney continues to lose both customers and market share,” writes Neil Saunders, managing director of GlobalData Retail, about Penney’s results. Clothing is critical in getting customers into stores, and Penney’s weakness “is now having a negative knock-on effect on other sectors, like home and electronics. Unless the issues in clothing are corrected, JCPenney will remain in a death spiral.”

And just after Christmas, Penney’s endured the ignominy of its stock falling below the $1-a-share level for the first time in its history, as it continues to struggle with inventory and supply chain problems, leading to massive markdowns and a $151 million loss in its most recent period. Worse, new CEO Jill Soltau, who joined back in October, has yet to say much about a plan to save the company. (She’s the company’s fourth CEO in six years.)

But as Sears inches towards the boneyard, Penney’s stock has rallied a tiny bit, up to $1.21, with some investors hoping a world without Sears might spell good news for Penney.

Meanwhile, Sears is still lingering on life support, with Bloomberg reporting that Eddie Lampert’s ESL Investments fund is submitting an improved offer that will keep Sears Holdings Corp. in business, although at a reduced size. 

He had initially put together a $4.4 billion takeover deal, which was rejected as inadequate. Sears has said it would consider the bid, along with others, when it moves to auction next Monday. Other creditors would prefer to see the company liquidated, and doubt Lampert can ever profitably resuscitate the 126-year-old store.