Iconic departmental store chain J C Penney Company Inc (NYSE:JCP) has been in significant trouble over the past few years due to billions of dollars in debts and the plunge in the stock price has also reflected the state of affairs. Last week, the company had another setback as Louis Vuitton owned Sephora announced that it was going to terminate the agreement to run in-store boutiques.
What to Expect Now?
The agreement still has three years to go. J.C. Penney’s slow growth has been cited as one of the reasons for the decision. Sephora went on to add that the retailer’s financial position was having a harmful effect on its brand.
While this is a blow, nothing has been confirmed yet. That being said, it is important for investors to consider whether J.C. Penney is going to be able to survive is Sephora does sever ties. Sephora has recently been losing customers to Ulta Beauty among teens. On top of that, the same-store sales at the J.C. Penney locations dropped by as much as 7.7% and by 3.1% the year before that. The decline was specific to the 650 stores that are located inside J.C. Penney stores. The 2000 Sephora stores in other locations performed well.
Sephora has been miffed with the fact that its employees had been furloughed by J.C. Penny, and in its court filing, it also mentioned that the departmental store operator had also explored the option of filing for bankruptcy without intimation. Both sides eventually stated that the issues had been resolved, and revised terms have been agreed upon. The details of those terms have not been revealed. It is quite clear that Sephora is an important factor with regards to the survival of J.C. Penney, and it goes without saying that the resolution reached between the two is a positive development.
The quick resolution, however, shows that the relationship between the two companies might end sooner than it was supposed to be. If that happens, the J.C. Penny might not actually survive.