JCP - JC Penney

[PlanMaestro]

Anyone in Dallas? Hey it's the Post so handle with care.

 

CEO stays in luxe hotel while Penney flounders.

http://www.nypost.com/p/news/business/ritz_crackpot_QH49hishsF4oKa55qrEORK

Johnson isn’t the only one skirting face time, sources said. Hundreds of workers at the Plano headquarters have begun showing up later for work and clocking out earlier, sources said.

 

“They used to be in the office at 7:30 in the morning, and they’d be calling you to get things done,” said an executive at one major Penney supplier. “Now, they’re rolling in at 8:30 or 9. If I got a 9:30 meeting with them, I’d be shocked.”

 

Instead of leaving at 5 or 5:30 p.m., sources said, the same workers now are routinely leaving at 4:30 — despite being saddled with more work in the wake of thousands of firings since Johnson took the helm in 2011.

 

As reported by The Post, Johnson this month plans to lay off as much as 10 percent of the 3,000 or so workers who remain at the Plano offices.

 

“Why break your neck for somebody who doesn’t appreciate it?” one former employee fumed, blaming Johnson’s insular, top-down management style for making workers feel like mindless drones.

 

Sources said Johnson, who has sought to dismantle Penney’s once-regimented corporate culture, hasn’t moved to stop the slacking. While the casual, Silicon Valley-style approach may have led to success at Apple, some insiders say it’s a bad fit for Penney’s complex, data-driven supply chain.

 

“This is a big retailer where a lot of different things need to be done every day at a certain time,” one insider said, noting that inventory management is growing spotty, even as Johnson seeks to bring back sales events that are more difficult to execute.

 

While Johnson may be hard at work when he’s away, sources said his secretive habits have usually left his activities and whereabouts murky to all but a handful of top officers and trusted confidants.

 

[constructive]

I wouldn't be surprised if Icahn was the mystery JCP bond owner/litigant. I'd be very surprised if it resulted in anything besides legal fees. JCP can just close the credit facility and cure the default, no judge in the country is going to put a huge company in bankruptcy over a default that easy to fix.

[ShahKhezri]

Anyone in Dallas? Hey it's the Post so handle with care.

 

CEO stays in luxe hotel while Penney flounders.

http://www.nypost.com/p/news/business/ritz_crackpot_QH49hishsF4oKa55qrEORK

Johnson isn’t the only one skirting face time, sources said. Hundreds of workers at the Plano headquarters have begun showing up later for work and clocking out earlier, sources said.

 

“They used to be in the office at 7:30 in the morning, and they’d be calling you to get things done,” said an executive at one major Penney supplier. “Now, they’re rolling in at 8:30 or 9. If I got a 9:30 meeting with them, I’d be shocked.”

 

Instead of leaving at 5 or 5:30 p.m., sources said, the same workers now are routinely leaving at 4:30 — despite being saddled with more work in the wake of thousands of firings since Johnson took the helm in 2011.

 

As reported by The Post, Johnson this month plans to lay off as much as 10 percent of the 3,000 or so workers who remain at the Plano offices.

 

“Why break your neck for somebody who doesn’t appreciate it?” one former employee fumed, blaming Johnson’s insular, top-down management style for making workers feel like mindless drones.

 

Sources said Johnson, who has sought to dismantle Penney’s once-regimented corporate culture, hasn’t moved to stop the slacking. While the casual, Silicon Valley-style approach may have led to success at Apple, some insiders say it’s a bad fit for Penney’s complex, data-driven supply chain.

 

“This is a big retailer where a lot of different things need to be done every day at a certain time,” one insider said, noting that inventory management is growing spotty, even as Johnson seeks to bring back sales events that are more difficult to execute.

 

While Johnson may be hard at work when he’s away, sources said his secretive habits have usually left his activities and whereabouts murky to all but a handful of top officers and trusted confidants.

 

 

The last two positions I've held, I saw my boss maybe once, possibly twice a week.  That doesn't mean they were at home eating caviar.  They were busting their ass working earlier than anyone else in my officce and late at night sending e-mails when I was sleeping.  One of them delayed cancer treatment to complete a deal.  They are both wealthy and don't need to work another day in their life...they are just motivated and Ron Johnson doesn't need to give 2,000 personal tours or work at JCP to put a stamp on a long and successful career.  He's motivated and wants to succeed. 

[PlanMaestro]

The last two positions I've held, I saw my boss maybe once, possibly twice a week.  That doesn't mean they were at home eating caviar.  They were busting their ass working earlier than anyone else in my officce and late at night sending e-mails when I was sleeping.  One of them delayed cancer treatment to complete a deal.  They are both wealthy and don't need to work another day in their life...they are just motivated and Ron Johnson doesn't need to give 2,000 personal tours or work at JCP to put a stamp on a long and successful career.  He's motivated and wants to succeed.

 

My worry is not Ron Johnson's motivation.

[Kraven]

I wouldn't be surprised if Icahn was the mystery JCP bond owner/litigant. I'd be very surprised if it resulted in anything besides legal fees. JCP can just close the credit facility and cure the default, no judge in the country is going to put a huge company in bankruptcy over a default that easy to fix.

 

I quickly read through JCP's filing.  This does seem very much like a case of gotcha and almost certainly is Icahn or someone like him.  This seems to me like someone with resources hired a law firm to comb through all of JCP's filings and see if anything catches their eye. 

 

While I don't think they are technically correct that JCP is currently in breach, it does show some very poor legal work on the part of JCP's lawyers.  JCP is making a technical argument that since they haven't borrowed any funds, there is no indebtedness and thus no breach.  True.  So they can most certainly just close the facility and make it all go away.  Brown Rudnick, the firm who filed the notice against JCP, is a fine, old line Boston firm and I would be shocked if they did something frivolous.  So this is more just a gotcha to me. 

 

If there had been a penny outstanding, I think JCP would be in breach.  They best be sure that there are no fees, deferred or otherwise, that are secured by the facility.  That could constitute indebtedness.  JCP's second argument that inventory isn't covered by the security interest on "principal property" seems just silly to me.  I don't know what they're thinking or whether they will try some kind of technical argument under the UCC, but inventory of retailer would certainly seem to me to be contemplated by the provision.

 

I suspect this goes away, but JCP is going to have to be more careful.

[ShahKhezri]

I wouldn't be surprised if Icahn was the mystery JCP bond owner/litigant. I'd be very surprised if it resulted in anything besides legal fees. JCP can just close the credit facility and cure the default, no judge in the country is going to put a huge company in bankruptcy over a default that easy to fix.

 

I quickly read through JCP's filing.  This does seem very much like a case of gotcha and almost certainly is Icahn or someone like him.  This seems to me like someone with resources hired a law firm to comb through all of JCP's filings and see if anything catches their eye. 

 

While I don't think they are technically correct that JCP is currently in breach, it does show some very poor legal work on the part of JCP's lawyers.  JCP is making a technical argument that since they haven't borrowed any funds, there is no indebtedness and thus no breach.  True.  So they can most certainly just close the facility and make it all go away.  Brown Rudnick, the firm who filed the notice against JCP, is a fine, old line Boston firm and I would be shocked if they did something frivolous.  So this is more just a gotcha to me. 

 

If there had been a penny outstanding, I think JCP would be in breach.  They best be sure that there are no fees, deferred or otherwise, that are secured by the facility.  That could constitute indebtedness.  JCP's second argument that inventory isn't covered by the security interest on "principal property" seems just silly to me.  I don't know what they're thinking or whether they will try some kind of technical argument under the UCC, but inventory of retailer would certainly seem to me to be contemplated by the provision.

 

I suspect this goes away, but JCP is going to have to be more careful.

 

What about issued Letters of Credit? 

[Kraven]

I wouldn't be surprised if Icahn was the mystery JCP bond owner/litigant. I'd be very surprised if it resulted in anything besides legal fees. JCP can just close the credit facility and cure the default, no judge in the country is going to put a huge company in bankruptcy over a default that easy to fix.

 

I quickly read through JCP's filing.  This does seem very much like a case of gotcha and almost certainly is Icahn or someone like him.  This seems to me like someone with resources hired a law firm to comb through all of JCP's filings and see if anything catches their eye. 

 

While I don't think they are technically correct that JCP is currently in breach, it does show some very poor legal work on the part of JCP's lawyers.  JCP is making a technical argument that since they haven't borrowed any funds, there is no indebtedness and thus no breach.  True.  So they can most certainly just close the facility and make it all go away.  Brown Rudnick, the firm who filed the notice against JCP, is a fine, old line Boston firm and I would be shocked if they did something frivolous.  So this is more just a gotcha to me. 

 

If there had been a penny outstanding, I think JCP would be in breach.  They best be sure that there are no fees, deferred or otherwise, that are secured by the facility.  That could constitute indebtedness.  JCP's second argument that inventory isn't covered by the security interest on "principal property" seems just silly to me.  I don't know what they're thinking or whether they will try some kind of technical argument under the UCC, but inventory of retailer would certainly seem to me to be contemplated by the provision.

 

I suspect this goes away, but JCP is going to have to be more careful.

 

What about issued Letters of Credit?

 

I'm not positive.  If they have issued LOCs under the facility it is likely not evidence of indebtedness unless it's been presented for payment.  It would seem in JCP's case that there's this big open bucket of potential debt just waiting to trigger this default, but which might not have done so just yet. 

[ShahKhezri]

http://biz.yahoo.com/e/130212/jcp8-k.html

 

I guess that fixes that.

[bmichaud]

http://247wallst.com/2013/02/15/taking-j-c-penney-private/

 

 

  Taking J.C. Penney Private

Posted: February 15, 2013 at 6:37 am

 

Print Email inShare.0 Now that nearly every public company in trouble appears to be a potential target for a leveraged buyout (LBO), J.C. Penney Co. Inc. (NYSE: JCP) has a chance to restructure and change its fortunes out of the public eye, at least so far as investors and the stock market are concerned.

 

Like Dell Inc. (NASDAQ: DELL) or Best Buy Co. Inc. (NYSE: BBY), the odds of a substantial improvement in J.C. Penney’s fortunes are close to nil. But it would not face a precipitous drop in share price because of quarter-to-quarter performance and month-to-month same-store sales, should it be owned by a few huge investors. Going private may be J.C. Penney’s only chance to dodge the effects of its falling share price.

 

J.C. Penney already has a few of the necessary pieces in place to go private. The first is that it has several deep-pocket shareholders, each of which for some reason believes that the troubled retailer has a chance at a better future. First among these is usually savvy William Ackman of Pershing Square. Another is Vornado Realty Trust (NYSE: VNO), as well as financial firms State Street Corp. (NYSE: STT) and Evercore Partners Inc. (NYSE: EVR). Among them, these investors hold a third or more of J.C. Penney’s shares, based on the retailer’s most recent proxy.

 

Ackman would need to lead any J.C. Penney LBO, both because of his position in the company’s stock and his membership on its board. Steven Roth of Vornado is also a board member. Ackman might make the argument, at least to himself, that J.C. Penney’s shares are cheap, having fallen by more than 50% in the past year.

 

Although J.C. Penney’s revenue drop has run more than 20% for three quarters, the company loses very little money. On revenue of $3 billion in its most recent quarter, the company lost $123 million. J.C. Penney has $2.9 billion in long-term debt, which is probably manageable in a low interest rate environment. That is particularly so if a restructuring of the retailer and sharp expense cuts are even moderately successful.

 

J.C. Penney likely would need to close scores of its least successful stores. It would hardly be the first retailer that took such an action in an attempt to improve margins. A lower store count could buy J.C. Penney a great deal of time to find a successful merchandising strategy.

 

If Ackman and his fellow large investors still believe in J.C. Penney, now is the time to take it private — before things get better, if they can, and the share price rises.

 

  Douglas A. McIntyre

 

 

Read more: Taking J.C. Penney Private - 24/7 Wall St. http://247wallst.com/2013/02/15/taking-j-c-penney-private/#ixzz2KylYMA4p

[PlanMaestro]

 

The unfortunate truth for Ron Johnson, is that in order to attract the customer he really wants, Ron Johnson needs to jettison the customer he already has. In other words, if the end game is to make Penney the choice for younger, more sophisticated and digitally connected consumers, they need to cut ties with the older, coupon coveting, JCP diehard. The conundrum here is painfully obvious…. the only way to aggressively drive the numbers you call out, would be to operate the chain in such a way as to apease the very customers that have brought the company to the ruinous state that Johnson is there to rescue it from. Tough spot – even for a smart guy like Ron Johnson.

 

Doug Stephens

http://www.retailprophet.com/

 

 

[bargainman]

 

make Penney the choice for younger, more sophisticated and digitally connected consumers

 

was it just me, or did this just stand out and hit anyone else when they read this?  Sorry, but how do you make a company named Penney the choice for younger sophisticated consumers?  There's a lot in a name, and having "Penney" in it, even if it's spelled differently from "Penny" is kind of like making the Dollar store the new chic place to shop...  If you don't believe me, read up on Cialdini's work and the Freakonomics work on the importance and biases in names.

[PlanMaestro]

Macy’s Inc., the second-largest U.S. department-store chain, will go to court in New York today to try to persuade a judge to permanently block Martha Stewart Living Omnimedia Inc.’s pact with J.C. Penney Co.

 

http://about.bloomberglaw.com/2013/02/19/macys-and-martha-stewart-head-to-court-over-penney-pact/

[BG2008]

Borrowing a page from Peter Lynch's book about listening to your wife when it comes to retail.

 

A bit of an interesting observation about JCP recently.  I've been going to their stores whenever my wife wants to go to the mall.  The store near us is one that has been transformed and looks amazing.  My wife has gone from skeptical about ever buying anything at JCP to saying things like "I can see why someone in their 20s may want to buy this outfit.  It's cheap and trendy and you wear it 2-3 times and then you get another outfit."  Last weekend, she really wanted to get a dress from Nanette Lepore.  This was the first time that she had an impulse to buy.   

 

Line at JCP

http://m.jcpenney.com/mobile/jsp/browse/productPresentationGallery.jsp?id=cat1002320087

 

Dresses at their own Boutique

http://www.nanettelepore.com/dresses.html

 

I'm seeing a pattern here.  JCP is bringing on a ton of stores that are 10-15 store boutiques that the average American can't afford because the price points are $300.  They work with these brands and they sell their products in JCP for $30 each. 

 

The feedback on Facebook has been that of older people saying "how much the new stores sucks and they can't find anything they like."  If you pay attention to who's saying what, there is a pattern of the older coupon clippers saying that the hate the new stores and can't find bargains anymore and the younger 20-30's women commenting on the style of their new products. 

 

This facebook page updates JCP's offering

 

http://www.facebook.com/jcp?fref=ts

 

Upcoming stores

Joe Fresh - Canadian fast retail brand with only 6 brands in the US.  Think of them as a Uniqlo or H&M.  Every JCP that I've visited is currently undergoing construction near their mall entrance to put in a Joe Fresh. If successful, can be a bit of game changer and will further solidify the mall-within-mall appeal. 

Marchesa - Runway/Coulture brands with dresses worn by Oscar actresses selling for 300-4,000.  JCP price points will be $70-100.  Formal wear, prom dress.  Stores are undergoing construction to put in Pearl Georgina Marchesa.  Look at the number of comments on these dressed, there are 10,000 comments which is very high for any single posting.  Wife is very intrigued by this upcoming line.     

Martha Stewart - Still in court, waiting to see if the judge will forbid JCP from carrying Martha Stewart products.  Hopefully, JCP can get the court decision to go ahead and sell Martha's products even if it doesn't bear Martha's name on it.  This was supposed to be rolled out in March, but will be delayed to May the earliest. 

On their housewear, they have significantly improved their houseware, china, offerings lately with Bodum, Mikasa, Royal Doulton, Fiesta,

Cosabella - Not to impressed with their intimate wear, higher price points elsewhere, this was a disappointment

William Rast - Men's wear, urban, trendy, no real opinion on this. 

Duro Olowu - Apparently another high end designer and even designed dressed for Michelle Obama, floral patterns, "African themed"

Pantone Universe - Houseware brand, hard to explain, but bright solid colors makes instant impression.  Wife has commented that she would like to buy some of their products and can certainly see it being appealing to the 20-30 year old

Lulu - handbags and accesories - affordable fashion

Giggle - Baby supplies/clothing, only ~15 stores rolling out into 700 locations and will provide a registry service for JCP. 

 

Would love to hear feedbacks from others, especially around the country that isn't Long Island, NY. 

[PlanMaestro]

We'll be visiting stores in March to include Joe Fresh (and Mrs. point of view) and planning to take pictures. The problem is that we are going to Long Island and Mass.

[BG2008]

Plan,

 

Your feedback on Mass would be helpful.  If you're visiting Long Island, I recommend that you visit the Roosevelt location (best looking store so far) and the Massapequa or Green Acre Mall location in valley stream.  The latter locations do not look as nice, but are in the process of transforming. 

[Cardboard]

Hi BG2008,

 

The store that I visited in Florida recently looked very clean with wide aisles, nice flooring and everything was well organized. Much nicer to walk around than at Macy's where you always seem to bump into someone. However, almost everything looked like on sale with clearance signs almost everywhere and rotating signs attached to the ceiling. Wifi was working, but some areas had no music and not only was there few shoppers, it felt cold. Apparently, it was renovated not that long ago. Of course, it wasn't likely the busiest time at the mall, but Macy's was pretty busy. The difference was striking. Was it very different where you visited than the experience that I am trying to describe?

 

I saw only one store within a store which was Sephora, although I may have missed MNG-Mango. Is the plan to make all the "shops" as enclosed as Sephora? Because "in there", it felt like being on another planet. Maybe 10-15 shoppers, 2 welcoming clerks not bugging you to buy and try this and that all the time like at Macy's. Good music, very nice atmosphere. Sales were made while I was there.

 

My hope was to see more of these shops like Levi's, Claiborne or some other. I saw these brands, but they were simply on nice stands with some displays, but nothing like an enclosed shop. Again, is the plan to "enclose" these brands in a store like Sephora or is this it for them?

 

Thanks

Cardboard

[PlanMaestro]

Well, now we know why Ron Johnson did not run any pilots for his unnecessarily risky pricing strategy.

 

"We didn't test at Apple."

 

http://online.wsj.com/article/SB10001424127887324338604578324431500236680.html

 

More:

 

* "I think not testing was a mistake," said Penney board member Colleen Barrett.

 

* People familiar with the results said the drop in sales has deepened to around 30%.

 

* Penney brought in Bain & Co. to assist with rounds of layoffs; (at least they brought the right people for the job)

 

* "My dream was that we'd go through a six-month transition, people would realize we have great everyday prices and that they like shopping on their terms, and the business would get better." - Ron Johnson

 

* Throughout his learning curve, though, Mr. Johnson hasn't budged on one key aspect of his strategy: store testing. Asked if he would do things differently a second time, the CEO's answer was decisive. "No, of course not."

 

[PlanMaestro]

http://farm9.staticflickr.com/8232/8511295088_77e4c6f44d.jpg

[BG2008]

Cardboard,

 

http://www.peridotcapitalist.com/2012/09/an-inside-look-at-the-new-retail-strategy-at-j-c-penney-part-1.html

http://blogs.mspmag.com/alishops/2012/08/07/new-shops-at-jcp/

 

Not all stores will be enclosed like Sephora.  Sephora is different than others.  The Izod store, Levi's, and JCP stores in the link is indicative of what a shop should look like.  There should be a construction area by the mall entrance dedicated to Joe Fresh by now. 

 

Yes, the volume between JCP and Macy is quite large at most stores that I've visited.  There used to be a ton of clearance products at the stores that I visited, a large amount has been moved through and they're stock new inventories and new shops.  There are still select areas of clearance items, probably 10-15% of the total square footage denoted to clearance. 

[PlanMaestro]

No Xmas last year. Better be ready for this year.

 

Q4

 

* Gross margin was 23.8 percent of sales

* Comparable store sales declined 31.7 percent.

* Internet sales decreasing 34.4 percent from last year.

 

http://finance.yahoo.com/news/j-c-penney-company-inc-213101438.html

 

For 2012:

 

* Cash from Ops: (10 million)

* Capex: (810 million)

* Cash and Cash Equivalents: 1,507 -> 930 million

* Long Term Debt: 2,868 -> 2,868 million

[PlanMaestro]

Penney Posts Large Loss as Sales Sink Further.

http://online.wsj.com/article/SB10001424127887323478304578330632060300820.html

 

Some vendors are also losing patience. One vendor said it had paid for architecture and plans for its boutiques, only to be told by Penney that the rollout would be delayed by a year. Vendors also say Penney is ordering low levels of goods instead of preparing for growth.

 

 

[texual]

Even bill ackman at this point couldn't really peddle this turnaround even cnbc would call him out or laugh at his defense. Jcp is doing everything wrong and the proof is in the numbers. The converted square footage space will turn into a monstrous money pit as each additional upgrade costs them more dollars to bring in cash but lower profitability. Too bad Johnson was a pretty smart guy at apple and target. I just think he moved way too fast on jcp and were seeing the fallout from his assumptions about consumers.

[texual]

Worst fourth quarter in 20 years. ...

[fareastwarriors]

I guess my purchases are not moving the sales number...  :'(

[BG2008]

Revenue came in inline with my projections.  But I was way off on the gross margin.  I had an inkling that gross margin was going to be bad this quarter as clearance signs started popping up all over the place right before Christmas.  Recently, the clearance racks have gotten less and smaller.  Hopefully, this is part of their kitchen sink strategy, write it down and move it behind.  I think that sales performance at the new shops are key.  Hopefully, the new shops, sales/promotions, will drive traffic to the stores.  Still thinks that shops will ultimately make or break this turnaround.  If they can't improve cashflow with 40% of the shops built out this year, then we've got a serious issue.