JCP - JC Penney

[ragnarisapirate]

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

 

"We didn't test at Apple."

 

* 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."

 

 

Because Apple and clothes are the same thing... I'd be bothered that he can't admit that he was wrong... That said, the guy seems capable.

 

I do wonder what this beast could liquidate for, just in case the whole turn around thing doesn't work out.

[biaggio]

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

 

"We didn't test at Apple."

 

* 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."

 

 

Because Apple and clothes are the same thing... I'd be bothered that he can't admit that he was wrong... That said, the guy seems capable.

 

I do wonder what this beast could liquidate for, just in case the whole turn around thing doesn't work out.

 

I think I could have run the Apple Stores. There's is nothing much to them- a bunch of tables with computers, i pads + phones on them. The success and genius was the products that everyone wanted so badly.

 

This appears to be a case of  seeing who is swimming without a bathing suit when the tide goes out.

 

At the same time I think a young Sam Walton would have a hell of a time turning around JC Penny and having it compete against Walmart, Costco, Amazon, Ebay

 

If I was Ackman I would be embarassed.

 

From the experience of SHLD I think JC PEnny would be risky even at less than liquidation value because I think it would be hard to liquidate it, meanwhile it is bleeding shareholder value-i.e there may not be much left by the time you sell everything.

 

That s the great thing about being a passive investor- its easier to change boats than try to bail water from the sinking boat.

[racemize]

Seems like Ackman has had quite a few bad runs on his active investing lately.

[biaggio]

Seems like Ackman has had quite a few bad runs on his active investing lately.

 

If I was him I would try to do my work quietly and be a bit more humble- he is obviously a very smart and able man- a bit too obnoxious for me lately (I am thinking of his work in CN Rail, and Herbalife)

[Otsog]

A reaction thread of the Q4 results from some of the new customers JCP is trying to get (20s-30s fashion focused males)

 

 

Best comments:

 

- I rather like JCP, which is something I wouldn't have said a year or two ago.

 

- Not my damn fault if they do (go bankrupt). I've bought plenty of clothes from them.

[Buckeye]

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

 

"We didn't test at Apple."

 

* 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."

 

 

Because Apple and clothes are the same thing... I'd be bothered that he can't admit that he was wrong... That said, the guy seems capable.

 

I do wonder what this beast could liquidate for, just in case the whole turn around thing doesn't work out.

 

I think I could have run the Apple Stores. There's is nothing much to them- a bunch of tables with computers, i pads + phones on them. The success and genius was the products that everyone wanted so badly.

 

This appears to be a case of  seeing who is swimming without a bathing suit when the tide goes out.

 

At the same time I think a young Sam Walton would have a hell of a time turning around JC Penny and having it compete against Walmart, Costco, Amazon, Ebay

 

If I was Ackman I would be embarassed.

 

From the experience of SHLD I think JC PEnny would be risky even at less than liquidation value because I think it would be hard to liquidate it, meanwhile it is bleeding shareholder value-i.e there may not be much left by the time you sell everything.

 

That s the great thing about being a passive investor- its easier to change boats than try to bail water from the sinking boat.

 

 

I think you are right on with this one Biaggio.  This is something I have thought as well.  Apple products sold themselves.  When you have lines of people, waiting out front of your store, to purchase product, it's clearly not the design of the store that has attracted the customers. 

 

If he were truly honest, Johnson would have to admit to himself that Apple's success had little to do with store design. 

[Otsog]

Because the products are so great I think it is difficult to parse the Apple retail store success and attribute credit to the stores outside a general agreement that is was largely the products. This is not something I have seen anyone dispute.

 

However, there are some basic facts we can look at without going too deep:

 

- If biaggio had run the stores they would not be near successful as they are today.

 

- In no way whatsoever were the stores built and designed for the hardcore fans who would buy Apple products anyway.  Apple fans would have lined up to a dilapidated cardboard box on launch day.

 

- Apple has received numerous architectural awards for its store designs.

 

- It turns out that after months of planning the Apple Store within a warehouse working model of it, Ron woke one morning with an idea of centering the displays around aspects of what people might want to do with their products rather than around the products themselves. He told Jobs who blew up at first because he realized the implications but probably because he realized that Johnson was right. As he drove to the model store with several execs he told them all to not say a word while he thought. When he got there he said that Ron wanted them to rethink how they were doing the store and it would delay them by months, but that Ron was right and it needed to be done.

[PlanMaestro]

The critical department is Women's that should be next, starting March with Joe Fresh. Carter's should also help.  It still looks like a 70/30 of failure/success until Women's gets some traction. Make or break.

 

I am starting to hear good things about JCP men's department after the clearances. These are a couple of interviews with Nick Wooster from last year.

 

http://www.esquire.com/blogs/mens-fashion/nick-wooster-interview-121812

http://www.gq.com/style/blogs/the-gq-eye/2012/06/the-gqa-nick-woosters-next-chapter.html

http://dappered.com/2012/10/in-person-the-nick-wooster-influenced-jcpenney-line/

[maxprogram]

I think I could have run the Apple Stores. There's is nothing much to them- a bunch of tables with computers, i pads + phones on them. The success and genius was the products that everyone wanted so badly.

 

I think you are right on with this one Biaggio.  This is something I have thought as well.  Apple products sold themselves.  When you have lines of people, waiting out front of your store, to purchase product, it's clearly not the design of the store that has attracted the customers. 

 

You guys don't know retail very well, do you?

[biaggio]

I think I could have run the Apple Stores. There's is nothing much to them- a bunch of tables with computers, i pads + phones on them. The success and genius was the products that everyone wanted so badly.

 

I think you are right on with this one Biaggio.  This is something I have thought as well.  Apple products sold themselves.  When you have lines of people, waiting out front of your store, to purchase product, it's clearly not the design of the store that has attracted the customers. 

 

You guys don't know retail very well, do you?

 

no I probably don't. I probably should have not said anything.

[Buckeye]

I guess not.  Do you Max?  If so, I am open to learn.

 

Is it far fetched to say that Apple's success has come more from it's products, than it's store design?  I guess there is really no way to know. 

 

Apple's products sell themselves.  The first Iphone was only available through on-line, sold for @600.00, and shipped directly from China. No Ron Johnson needed :)

 

 

 

 

[ItsAValueTrap]

You can buy Apple products:

Apple store online

other online stores (there was a time when you didn't need to pay certain taxes)

in physical Apple stores

in other physical retailers

 

While physical Apple stores did not have the best prices and sold the same thing, the stores were very profitable and had astronomical numbers (e.g. sales per square foot).  So I would say that the Apple store was clearly doing something amazing.

 

see

"Any advantage to buying from Apple store?"

http://forums.macrumors.com/showthread.php?t=419831

 

*I shorted JCP, covered at a profit, have no position in it now.

[Buckeye]

Hey Value,

 

Maybe its a chicken or egg thing?  I know the per square foot sales are amazing but is because of the stores or the product?

They have 400 stores that do on average 50 mil in sales a year for 20 bil in total sales, or 12% of total company sales.

So while the stores themselves may do great numbers, they are a small part of total revenue.

 

I hope my numbers are correct. And there may be no way to really know.

[Otsog]

Is it far fetched to say that Apple's success has come more from it's products, than it's store design?

 

It is not a mutually exclusive distinction.  Nobody is arguing that Apple's success isn't from it's products.

 

[ItsAValueTrap]

Maybe its a chicken or egg thing?  I know the per square foot sales are amazing but is because of the stores or the product?

They have 400 stores that do on average 50 mil in sales a year for 20 bil in total sales, or 12% of total company sales.

So while the stores themselves may do great numbers, they are a small part of total revenue.

 

I think what's relevant to JCP is how well stores are being run.

 

As a retail operation, the physical Apple stores performed a lot better than other online/offline retailers that sold the same Apple products.  So it's probably the store, not the product (which is the same everywhere).  So one can make the argument that Apple Stores are an amazing retail operation.  Perhaps this will translate over to JCP.

 

If you look at the year-over-year same store sales for JCP, it doesn't look like the Apple "magic" is transferring over.

[premfan]

Hi my name is premfan and i'm a retail turnaroundohlic. Repeat after me no more retail turnarounds!

[Buckeye]

Good Points Otsog and Value.  And Premfan, you offer a great conclusion.  Retail turnaround may be the great oxymoron. 

 

I guess there is always the possibility that Ron is able to make this work, then every other large retailer copies the strategy, thus eliminating any competitive advantage. 

 

 

[luck]

premfan, this turnaround has some downside protection with the real estate.  i don't think ackman will let it bleed to zero. 

 

after this earnings report and the supposed "we didn't test at apple" commentary from johnson though, i'd probably consider this at $12 or less, and i'd have to visually see the new jcp working with my own eyes to confirm the initially positive "new jcp" numbers. 

 

that webcast was also kind of weird. cfo had this pained expression on his face against the blue sky and clouds background. 

[muscleman]

I visited a JCP store yesterday. It was quiet. My gf was thrilled by their latest designer dresses, but wasn't happy to buy because of the $110 price. They said those dresses arrived on Friday, and are only available in JCP. They also told us that if we open a JCP credit card, we would get 20% off on everything purchased in 48 hours.

 

So I think JCP is trying to copy the exact model of Macy's. Could anyone tell me why Macy's has such a success but JCP couldn't win back the customers?

 

BTW I don't think JCP's new designer dresses will succeed. If the same dresses are in LV or Prada and are labelled $500, I think they will be sold right away. But in JCP, I don't even see many affluent customers walking into it.

[DCG]

 

So I think JCP is trying to copy the exact model of Macy's. Could anyone tell me why Macy's has such a success but JCP couldn't win back the customers?

.

 

Product selection. I can't ever find anything worth buying in JCP, while Macy's has things I buy. I just bought a new Marmot winter jacket in Macy's last week. The store within a store concept is meaningless when it's mostoy a bunch of crappy brands (which is what JCP is right now IMO).

[BG2008]

My observation of the Pearl by Georgina Champman Marchesa that sells the dresses for $110 is a bit different.  The shops opened on Friday and it is the first time that I've been to a JCP and seen

 

1) People turning their heads and walking/running to the shop and touching the dresses and trying them on.  Prom season might've been a catalyst. 

2) I've seen people take the $250 dress to the cash register and seemed really excited about it

 

There are a ton of web reviews of younger working women who state that they want to visit JCP now that theses designer dresses are available.  My wife also explained that the Pearl shop offers very high end Haute Couture dresses at affordable prices.  They're not dirt cheap, but the designers in essence made what was previously $3,000 dresses/gowns available at price points of $70 to $250.  She thought that it was a coup for JCP and should do well.  The sales lady at one of the stores told me that the dresses sold out at the Manhattan location.   

 

http://stylenews.peoplestylewatch.com/2013/03/01/marchesa-jcpenney-pearl-by-georgina-chapman/

http://www.fabsugar.com/Prom-Dresses-Marchesas-Georgina-Chapman-Under-250-28369197

http://www.justpandippo.com/2013/02/pearl-by-georgina-chapman-of-marchesa.html

http://brokecitystyle.com/2013/02/27/pearl-by-georgina-chapman-of-marchesa/

http://www.dailybeautyreviews.com/georgina-chapman-for-jc-penny-pearl-collection-2/

 

Muscleman, where are you located?  I'm starting to wonder if what I'm seeing on Long Island/NYC is due to higher disposable income.  Guys, when you share store observations, it would help to indicated your locations to help calibrate the various regions. 

[muscleman]

My observation of the Pearl by Georgina Champman Marchesa that sells the dresses for $110 is a bit different.  The shops opened on Friday and it is the first time that I've been to a JCP and seen

 

1) People turning their heads and walking/running to the shop and touching the dresses and trying them on.  Prom season might've been a catalyst. 

2) I've seen people take the $250 dress to the cash register and seemed really excited about it

 

There are a ton of web reviews of younger working women who state that they want to visit JCP now that theses designer dresses are available.  My wife also explained that the Pearl shop offers very high end Haute Couture dresses at affordable prices.  They're not dirt cheap, but the designers in essence made what was previously $3,000 dresses/gowns available at price points of $70 to $250.  She thought that it was a coup for JCP and should do well.  The sales lady at one of the stores told me that the dresses sold out at the Manhattan location.   

 

http://stylenews.peoplestylewatch.com/2013/03/01/marchesa-jcpenney-pearl-by-georgina-chapman/

http://www.fabsugar.com/Prom-Dresses-Marchesas-Georgina-Chapman-Under-250-28369197

http://www.justpandippo.com/2013/02/pearl-by-georgina-chapman-of-marchesa.html

http://brokecitystyle.com/2013/02/27/pearl-by-georgina-chapman-of-marchesa/

http://www.dailybeautyreviews.com/georgina-chapman-for-jc-penny-pearl-collection-2/

 

Muscleman, where are you located?  I'm starting to wonder if what I'm seeing on Long Island/NYC is due to higher disposable income.  Guys, when you share store observations, it would help to indicated your locations to help calibrate the various regions.

 

Oh, you are in Manhattan. No wonder. Rich dudes are all there.

The story I visited is this one:

https://maps.google.com/maps?hl=en&ie=UTF-8&q=seattle+northgate+jcp&fb=1&gl=us&hq=seattle+northgate+jcp&cid=0,0,7968531460125271769&ei=k900UcnQLYbzrAH6w4H4CQ&ved=0CKQBEPwSMAM

 

I wouldn't say Seattle people are poor. Microsoft, Google, Boeing, Amazon and Costco are all here. The plaza is full of cars and very hard to find a parking spot, but I saw very few people in JCP on Saturday. Only about 10 folks in it.

[rogermunibond]

Target did something similar with Christmas 2012.  They had like a dozen or so top fashion houses design interesting one-off pieces for them.  Clothing, accessories, and home decor products.  Price points were much higher than usual.  $50-100+.  Guess what was mostly unsold after Christmas.

 

In Target's case they were replicating a very successful thing they did with Missoni back in 2011.  They had a 400 piece Missoni collection that had more reasonable price points for Target.  That was a huge hit, IIRC.

[BG2008]

Muscleman, obviously Seattle is a very desirable location with high disposable income.  My comment regarding geography was to make sure that I am not "focusing on the tree and forgetting the forest".  Over the weekend, a friend of mine who visited 2 locations in San Francisco mentioned that his gf was very excited about Marchesa and thought that the stores provided good value.  She's mid to late 20s professional gal.     

 

Yes, I was aware of Target's collaboration.  I went to Target during X-Mas time.  There's clearly a difference between Marchesa building a shop and creating the right ambiance vs Target just putting the higher price point products on shelves in a seasonal area.  I think that the shopping experience in Target and JCP will be dramatically different once the shop build outs are completed. 

 

BTW, we bought some Jason Wu Christmas tree ornaments at a 75% discount. 

[luck]

i live in the bay area in a pretty wealthy suburb.  there's some traffic, on par with macy's.  there's a huge joe fresh installation coming on march 15th.  my wife is interested in that.  not sure how many folks in the bay area know about joe fresh - so it might be a bit of an education process here. 

 

bg or others, what's your assessment of the downside protection per share from the real estate at this point? 

 

taking a discount to the base case real estate value of around 50% due to monetization/liquidation difficulties, i am thinking $10 a share as a possible entry point. 

 

i am of the opinion that ackman will indeed halt the cap ex (as he's stated) if extreme losses continue late this year and new jcp starts to falter.  not sure what will happen after that.