JCP IS GOING DOWN FASTER THAN OPRAH on a BAKED HAM

JCP

JCP dropped below $17 for about a 20% decline. More than 15% of its float has traded in less than 24 hours. 30% of the float is short.

Where to find maximum pessimism and hatred:

Here are the headlines.

“Simply stunning results” from J.C. Penney (JCP), says Tiburon Research’s Rob Wilson, quickly…

  • Wednesday, February 27, 4:58 PM ET

Sales Sink, Stock Gets Hammered in After-hours Trading (Reuters)

Feb. 27, 2013,  4:44 PM  More on J.C. Penney’s (JCP) Q4: No sigh of relief for investors just yet as the firm reports comparable store sales fell 31.7%, below the consensus call of -26.9%. Customer are fleeing, but no give up from CEO Ron Johnson: “…we are energized by our shop roll out plans.” Gross margin was crushed, falling to 23.8% of sales vs. 30.2% last year. Internet sales slumped again, losing 34.4% Y/Y just marginally better than last quarter’s 37% nosedive. Cash position $930M at end of Q4. No guidance is issued, but the retailer says it will open 20 shops geared toward home products in 505 stores with brand partners. JCP -4.4% AH. (PR) Read comments

·         Shareholders need to revolt aggressively (Yahoo poster 6 PM 2/27/13)

The Board needs to fire Ron Johnson tonight. They need to then hirte a trustee to rebuild it and then resign en masse for hiring this imbecile. First rule of retail: Don’t f it up!   Kill the BOD and Johnson NOW.

Ron Johnson couldn’t sell pus*y to a troop train. How many times will we sell retailers fail due to hiring rock star leadership who is so arrogant to turn away from the existing customers without attracting any replacements? Just desserts Ron. Eat #$%$.  Ron is a $%^&*! piece of $%^&!

Where is the class action shareholder lawsuit ? Will RJ fly home tomorrow on the corporate jet ? Will he still be racking up insane bills at the Ritz ?

Can you feel the love?  Yes, investors are upset, but do you read any deep analysis as to the value of the company?

What happened in this situation–Dillards (DDS)? Perhaps a case study is in order.  Ron Johnson is a genius at $40 and now at $17 he receives death threats. I have never seen a turn-around take less than 36 months. Let’s check back in 2014.

Daillard 2001

Dillards monetized some of its real estate assets through a REIT.

http://finance.fortune.cnn.com/2011/01/20/dillards-strikes-real-estate-gold/

http://retailtrafficmag.com/retailing/analysis/dillards_reit_play_01262011/

I am not implying that JCP should do the same, but I recon there is a reason JCP has not dropped below $14 per share even in the dark days of 2009.    Can the massive hate and fear take us to new lows? Not, if it doesn’t happen in the next month.

14 responses to “JCP IS GOING DOWN FASTER THAN OPRAH on a BAKED HAM

  1. Did you hear in the conference call that Ron Johnson was admitting that his marked down strategy did not work and gave a reason why people like coupons. It is nice he is admitting why it didn’t work and it is the first step in the turnaround and I am interested in hearing about Dillards.

  2. I don’t think retail is a great business, but if I can buy near/below replacement value of real estate (why did Vornado buy at $25 or so?) and get the turnaround for “free” then I will do it in a limited way. I own leaps and have occasionally shorted out of the money calls on rallies. I am long-term oriented, I just seek to create the lowest cost exposure.

    I will try to put together a case study on Dillards. I await a package from the company now.

  3. LMAO on the headline. That is classic Chew

  4. He doesn’t have much room to maneuver. The only thing of value is the land asset. Even then, take out all the liabilities, mark down inventory and add cash and there is little to nothing left over. Its value is as an ongoing entity in some form maybe after chap 11 unless things pick up or price goes really cheap. He’s done a good job cutting operating expenses, but not much luck with “cost of goods sold”. What’s that? How many more quarters till cash runs out if sales don’t improve without new financing (stock issue?). Maybe 8.

  5. Agreed, looks grim. Expect further price declines and negative press. Expect lower stock prices today because there is no hope. All is lost.

    • There’s a paragraph in Peter Lynch’s Beating Wall Street about Dillard’s. The founder and son were serious about cost control – portrayed with “scroogian intensity”. I think WEB would like these owner managers. They focused on merchandising and got extremely efficient. They also satyed in out of the way places and when other department stores went bust, they came in and scooped up the parts and added it to their operations.
      When you get the case study together, send him an invite John. “Hi your company is crashig and burning and you are probably stressed to the break point, but you might want to join us on a case study over at csinvesting…”
      Come with me if you want to live…classic JC..

  6. Mr. Chew,

    Have you got any good resources on Stanley Druckenmiller?

    Kind regards,
    Belgian Guy

  7. A couple of details, which may be in the weeds, but which the market is missing. Dillards had a tax NOL which could shelter the massive gain which they realized when the contributed property to a REIT. JCP is starting to generate NOLs but as of now do not appear they could shelter the gains, which would be huge. Any proceeds from sale of the real estate first go to pay off the bondholders anyway, so this is a hard asset to generate liquidity from. They have sold everything else that wasn’t nailed down – leveraged leases, REIT investments, etc for $400mm in proceeds over the last year, so all the easy liquidity is gone. It will be a complicated trick to keep the factoring community happy and buying receivables from JCPs vendor given the slow pay they have adopted and the fact that the credit line is secured by inventory, which subordinates the factors.

    • Excellent points. Thanks for your knowledgeable and insightful comments. Yes, management has to get traffic and conversion. From several different sources, I hear that shoppers like the new merchandise and concepts. I think Johnson (with hindsight) turned off the cash cow to fund the changes—too much too soon. However, JCP had to change. But it seems he realizes his mistakes, but it may be too late? I don’t know.

      I am curious why Steve Roth of Vornado became an investor in JCP. He must like some of the properties?

      God bless good turn around executives. What a tough job.

  8. Dear Belgian Guy. No but try reading all the Market Wizard Books and the Book More Money than God. He is mentioned in there.

    But he isn’t the investor that you WILL become.

  9. Dear Kevin:

    I am interested in understanding Dillards.Getting 10 years of annual reports mailed to me. But turnarounds are messy. I was actually pleasantly surprised. Yes, sales fell off a cliff, but they cut costs and conserved cash while transitioning. I thought they would have been down $300 to $500 million.

    Now Johnson will be hanged if he doesn’t realize and accept his errors and adjusts. No one is perfect. He isn’t the God people thought he was at $40 and the total idiot when JCP trade at $15? “As much as we accomplished last year, we also made some big mistakes,” Johnson said on a conference call late Wednesday. “And I take personal responsibility for these. Experience is making mistakes and learning from them … We learned she prefers a sale. At times she loves the coupon.”

    Johnson said the company is bringing back weekly sales and revving up comparison pricing to retrieve lost shoppers. The number of product promotions, however, won’t return to past levels, but geared instead toward its own private label brands and national brands that choose to participate.

    Yes, if trends are extrapolated this is a $0 but the main investors w2ould force a partial real estate conversion before $0 is hit–that is one backstop. But investors need to have patience and deep pockets. You are betting against momentum. Therefore if you are right you make Dillard type money and if you are wrong expect 30% to 100% loss. 3x to 10x vs 50% to 100% loss–it is the probabilities that are tough.

    Position accordingly or better yet, move on to something easy.

    I run the “most hated” fund, where I am only allowed to invest in companies where there is high short interest, negative press and commentary.

  10. My current treatment http://youtu.be/DCUmINGae44

    Does anyone have the recent VII Feb. 28 2013 Issue?

    https://secure.valueinvestorinsight.com/freetrial/

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.