Does J.C. Penney Have A Bigger Problem Than It Can Handle?

Despite posting its biggest quarterly loss since 2004 on Wednesday, one option that is not on the table — although one that could possibly alleviate J.C. Penney’s (NYSE:JCP) precarious financial position — is ending Chief Executive Officer Ron Johnson’s transformation plan. With the company’s abysmal results, it has become evident that the bull thesis, which predicted a reversal in sales to begin to percolate this year, has been shaken.

Chief Financial Officer Ken Hannah — who stated that the company would have $1 billion of cash at the end of 2012 — said J.C. Penney’s is still committed to financing its revival with operating cash, but given the company’s current financial state of affairs, it may have to pursue alternative sources of capital.

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Cash flow has become the primary problem, putting the retailer’s plan to fund its turnaround from operations in jeopardy. Fourth-quarter results showed that operating cash dropped by 32 percent in the three-month period, pushing J.C. Penney’s balance below the $1 billion target.

Johnson’s plan to streamline the company’s operations was admirable; he envisioned a company that could offer everyday low prices and boost its offerings with a wide range of small boutiques from designers from Levi’s or Sephora. But Johnson’s attempt to revitalize the chain and transform the business, from pricing to customer experience, has not happen and it is looking increasingly like it will never happen…

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