J.C. Penney Keeps Being J.C. Penney -- to the Detriment of Investors

Yesterday, J.C. Penney made a preliminary announcement regarding its first-quarter results for the quarter ended May 4, 2013. The announcement was made in conjunction with its earlier news that the company had secured a $1.75 billion credit facility. The good news is that the company is still a company, having successfully stayed afloat for one more year. The bad news is just about everything else.

Making all the right choices
J.C. Penney said that it was looking for a 16.4% fall in revenue for the first quarter. It's also expecting a 16.6% decline in comparable sales, due to ongoing construction work in 505 stores across the U.S. Finally, the company has managed to burn through $80 million of cash in the three months since the end of its last fiscal year. In short, J.C. Penney has continued to be J.C. Penney.

On the bright side, this could be a turning point. Maybe CEO Mike Ullman can manage to stop the company's seemingly inevitable decline into liquidation. While customers are clearly still uninterested in shopping at J.C. Penney, Ullman has been with the company long enough to know what could bring people back to the fold.

On the other hand, this might be just one more step on the road to ruin. Ullman stalled out in his last stint as CEO, and things are in a much worse place now than when he left the first time. If that's the case, this might actually be a great time to buy J.C. Penney stock, as it will have to start thinking about its backup plans, which could be excellent for investors.

Selling the family silver
The failure of the J.C. Penney retail business may be just the thing for investors. Analysts have pointed out that the company is sitting on a whole lot of real estate worth billions of dollars. By either selling that land off or bundling a chunk of it into a new business, J.C. Penney could release a huge piece of cash to investors.

The problem would be if J.C. Penney continues to rack up debt and has to pay off its creditors before it pays off stockholders. The company's new agreement with Goldman Sachs is secured partially on J.C. Penney's real estate. With so little cash on hand, the company could be in a tight spot if things don't start to turn around. Luckily, it has five years before the end of the loan term.

Realistically, the new figures from J.C. Penney aren't shocking, but I still don't think you can call this good news. It's easy to say that J.C. Penney is unsalvageable -- since everyone has failed thus far -- but Ullman deserves a shot. I'll be looking for one of two things by the end of next quarter. Either the business makes some small headway, in the form of revenue decline slowing or sales leveling off, or Ullman announces a plan to turn that real estate into cash. Without any of that in sight, I'm going to continue keeping J.C. Penney at arm's length.

Is this a turnaround story in the making?
J.C. Penney's stock cratered under Ron Johnson's leadership, but could new CEO Mike Ullman present the opportunity investors have been waiting for? If you're wondering whether J.C. Penney is a buy today, you're invited to claim a copy of The Motley Fool's must-read report on the company. Learn everything you need to know about J.C. Penney's turnaround -- or lack thereof. Simply click here now for instant access.

The article J.C. Penney Keeps Being J.C. Penney -- to the Detriment of Investors originally appeared on Fool.com.

Fool contributor Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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