J. C. Penney Company, Inc. Equity Valuation and Analysis As of ...

Penney’s inventory turnover is in line with the industry standard. Where as SteinMart outperforms the industry because it uses a variation of the just-in-timeinventory method to keep inventory low.Days Supply of InventoryDays Supply of Inventory1601401201008060JCPKSSDDSSSISMRT402002002 2003 2004 2005 2006YearDays supply of inventory is a measure of how long inventory sits idle.Days supply of inventory is the first half of the cash-to-cash cycle. In the case ofmost firms in the department and discount segment of the retail industry,inventory turns over approximately once every 90 to 120 days (once every 3 to 4months). For instance, J. C. Penney turns its inventory every 103 days (3 ½months). When you combine days supply of inventory with days salesoutstanding, you get the cash-to-cash cycle. In the case of J. C. Penney, thecash-to-cash cycle takes approximately 109 days. This is quite common amongthese firms due to the nature of the retail industry. The retail industry is proneto affects of seasonality. Stores like J. C. Penney typically liquidate and replenishtheir inventory with every season.77