valueinvestor82 Posted December 5, 2013 Share Posted December 5, 2013 I have come to expect negative stories as one of several signals that can mark the bottom for a stock, but JCP is particularly entertaining. Notice how the rules of the game keep changing according to those sharing a bearish view. When sales were declining, the decline was going to continue, and they were "done." While the verdict is still out, and 1.33 quarters do not make a trend, a double-digit 10.1% sales increase clearly shows that a return to the strategy of discounting is yielding results, just like when the company was profitable prior to Ron Johnson. But notice how now 10.1% isn't good enough. No, they have to recover every dime of sales lost last year, plus prove for several quarters that margins are holding up, before pride and emotional commitment to ones prior conclusion will allow the bearish to change their view. Fine by me, the last time I pointed out the disconnect we went from $6.42 to $9.70ish, by the time analysts and the hordes of Motley Fool and SA authors change, maybe we'll be at $13-$15. Link to comment Share on other sites More sharing options...
Luke 532 Posted December 10, 2013 Share Posted December 10, 2013 Hurwitz (CEO of DDR and GGP board member) on JCP... http://video.cnbc.com/gallery/?video=3000224940&__source=yahoo|headline|quote|video|&par=yahoo Interviewer: "JCP 10% rise in SSS comps but Wall Street said it's 'not enough'" Hurwitz: "I think Wall Street is wrong on that..." Link to comment Share on other sites More sharing options...
yadayada Posted December 10, 2013 Share Posted December 10, 2013 I have come to expect negative stories as one of several signals that can mark the bottom for a stock, but JCP is particularly entertaining. Notice how the rules of the game keep changing according to those sharing a bearish view. When sales were declining, the decline was going to continue, and they were "done." While the verdict is still out, and 1.33 quarters do not make a trend, a double-digit 10.1% sales increase clearly shows that a return to the strategy of discounting is yielding results, just like when the company was profitable prior to Ron Johnson. But notice how now 10.1% isn't good enough. No, they have to recover every dime of sales lost last year, plus prove for several quarters that margins are holding up, before pride and emotional commitment to ones prior conclusion will allow the bearish to change their view. Fine by me, the last time I pointed out the disconnect we went from $6.42 to $9.70ish, by the time analysts and the hordes of Motley Fool and SA authors change, maybe we'll be at $13-$15. How are the sales up exactly? Looking at the 10q, and they are down to 2.7 billion from 2.9 billion in 2012? and still making a loss. Link to comment Share on other sites More sharing options...
valueinvestor82 Posted December 10, 2013 Share Posted December 10, 2013 October was the last month of Q3, so JCPs Q4 will consist of November-January. October was 0.9% higher than October 2012, and 4.5% higher than September. November sales were up 10.1%.you won't see the numbers reported until after the quarters end and if they "made a loss (I'd say made a profit or suffered a loss)," but the trend didn't start until October, which is why you can't see the turn in a full quarters results. Now that those who are bearish on the stock don't have a weak sales trend to point to, they've switched to worrying about margins and if the trend of rebounding sales will continue. Typically, by the time the mainstream realize they're going to make it (not to be confused with this particular company making it or not- just in general), the market has already priced in that reality and the biggest moves in price are done. Link to comment Share on other sites More sharing options...
valueinvestor82 Posted December 27, 2013 Share Posted December 27, 2013 Market efficiency: JCP lost about the same amount of money as twitter last year (TWTR), yet twitter is high enough in price that it's 13% decline today wiped out 2 JCPs. That's ok- we all know that TWTR will become the next IBM. Sarcasm.. Link to comment Share on other sites More sharing options...
valueinvestor82 Posted January 24, 2014 Share Posted January 24, 2014 Jcp: so bad it's good https://sumzero.com/headlines/consumers_and_retailing/JCP/212-jc-penney-so-bad-its-good-again Link to comment Share on other sites More sharing options...
BargainValueHunter Posted January 31, 2014 Share Posted January 31, 2014 The last time JCP could have been purchased at this price the Iranian Hostage Crisis had just ended. Anyone buying down here? Link to comment Share on other sites More sharing options...
yadayada Posted January 31, 2014 Share Posted January 31, 2014 looks like equity holders will be wiped out in a restructuring. Link to comment Share on other sites More sharing options...
valueinvestor82 Posted January 31, 2014 Share Posted January 31, 2014 I own JCP. People say equity holders will be wiped out in a restructuring, but look at the assumptions made in using that statement as a base case. Why is restructuring so certain? Sales bottomed in the summer and have been improving ever since. This stock has a lot of hair and huge uncertainty still exists, but 108 million shares short and a lack of any belief that a turnaround can work seems a little too far at this point. We went from $6 to $10 to $6 again with only positive news in between, the exception being the SEC asking about the capital raise but I don't see anything happening there given that Cnbc was the most confusing piece of that puzzle. Link to comment Share on other sites More sharing options...
gfp Posted January 31, 2014 Share Posted January 31, 2014 While I agree with you that a restructuring isn't as imminent as people are assuming, don't delude yourself that there's been nothing but positive news since the shares where first at 6. The holiday quarter non-information certainly wasn't positive. People buying the longer dated debt at 66 will probably continue to short the stock, so there are going to be a lot of shares sold short. Short interest shouldn't really factor into your investment analysis. And remember that with a poison pill at 4.9% and a current market cap of $1.76 Billion, a new investor is limited to an $86 million position. Not likely to interest anyone above a certain size. Goldman took most of the collateral and their security trades above par. Link to comment Share on other sites More sharing options...
yadayada Posted January 31, 2014 Share Posted January 31, 2014 I own JCP. People say equity holders will be wiped out in a restructuring, but look at the assumptions made in using that statement as a base case. Why is restructuring so certain? Sales bottomed in the summer and have been improving ever since. This stock has a lot of hair and huge uncertainty still exists, but 108 million shares short and a lack of any belief that a turnaround can work seems a little too far at this point. We went from $6 to $10 to $6 again with only positive news in between, the exception being the SEC asking about the capital raise but I don't see anything happening there given that Cnbc was the most confusing piece of that puzzle. you sound like your v emotionially invested in this. They need to recoup alot of sales, and turnarounds are pretty rare in retail. There is a reason they cannot raise more equity. ALot of things need ot go right here to make money. Link to comment Share on other sites More sharing options...
valueinvestor82 Posted January 31, 2014 Share Posted January 31, 2014 I agree with most of what you both just said, and I certainly didn't intend to sound like I am emotionally invested. I also didn't intend for a couple of data points to be viewed as my thesis for ownership. I will point out that NOT reporting a sales number is not in itself bad news, in fact IR will tell you that they wanted to share it. You're speculating with that comment. There's a lot of risk and turnarounds are tough for sure! Link to comment Share on other sites More sharing options...
Mephistopheles Posted January 31, 2014 Share Posted January 31, 2014 I will point out that NOT reporting a sales number is not in itself bad news, in fact IR will tell you that they wanted to share it. That's what they said? So if they wanted to, why didn't they? IMO, the comps were probably positive, but marginally so. They said that the trends were expected, and according to the last CC, they were expecting comp growth. So I feel they would get in trouble for saying that it went as expected if they were in fact negative. However it's still strange that they didn't release the numbers. This makes me feel that December was far less than the 10.1% growth in November. Link to comment Share on other sites More sharing options...
valueinvestor82 Posted February 1, 2014 Share Posted February 1, 2014 It's a good question, why didn't they? I didn't call IR personally, but I spoke with the head analyst at a major brokerage firm who had that conversation. Apparently someone higher up overruled IR and said that they couldn't. It was called a "disconnect" between an IR who wants to be transparent and communicative and upper management who didn't want to share for who knows what reason. I know that they had said previously that they wanted to get away from SSS comps each month, but it seems like more bad PR to decide to make that shift inconsistently when everyone is focused on it. I surmise that a "middle of the road" scenario is that December was marginally positive, maybe 2-4%, and management didn't feel that it was worth bragging about. The entire Q4 would still look ok with that result, but not fantastic. Several days were affected by inclement weather, but that would be true for everyone. Part of my thesis has always been that JCP customers are discount driven, not brand loyal, so bringing back attractive deals would bring back customers seeking those deals. I think the decline was Ron Johnson led, not a massive fundamental decline because of people randomly fleeing to other retailers. SHLD (though far richer in assets) worries me more on the retail side, since they didn't shock the system with one big bad idea, they just created a long term, steady decline by neglecting capex etc. some of JCPs capex spent during the RJ era shouldn't have to be repeated for some time, and sephora seems to be a big hit as one example of some derived "benefit" of that spending. I. Believe Q4 results and guidance will be decisive for me given that JCP lacks the margin of safety that I perceive SHLD to have given it's various assets. Link to comment Share on other sites More sharing options...
Mephistopheles Posted February 1, 2014 Share Posted February 1, 2014 Yea I agree about the discount driven customers. At this point though, it's a race against time. If sales keep trending up like in November for the next year, then the stock could be a triple from these levels. However if they stagnate, it will be really bad as the company simply can't survive without 5-10% comps. They will have like $450 million in interest, debt, and lease obligations in 2014 so they need to grow, and grow fast. It would be easy to get that without other headwinds that exist: consumer spending slowing, and general headwinds for brick and mortar retailers. And if December was only marginal growth, that's a bad sign, especially coming from such a low base. November was good but didn't they have the biggest sale ever or something? There is a lot of optionality in this stock. Either 2-3x or 0 over the next couple of years. IMO, makes little sense to own the debt as Goldman (term loan) and JPM (credit facility) get all the assets in bankruptcy, and the upside isn't nearly as much as it is with the stock. I own a tiny position. Link to comment Share on other sites More sharing options...
Mephistopheles Posted February 4, 2014 Share Posted February 4, 2014 http://ir.jcpenney.com/phoenix.zhtml?c=70528&p=irol-newsArticle&ID=1896559&highlight= Update. Liquidity at $2 billion. Combined November/December sales went up by 3.1%, and for 4Q overall the increase was 2.0%. Online sales up 26.3% in 4Q. November = 10.1% November/December = 3.1% November/December/January = 2.0% This means December was probably a marginal increase, and January could have even been a negative comp? I don't like how they stopped showing monthly #s after November, which was also their best month in some time. Link to comment Share on other sites More sharing options...
valueinvestor82 Posted February 5, 2014 Share Posted February 5, 2014 I understand the importance (and relative disappointment) with the SSS increase of 2%, but If you add the 26.3% online sales increase (on $315 million in Q4 2012 of the $3.884 billion), I come up with a total sales increase of 4.1% or $154.2 million. I'm not sure how this plays into the possibility of future dilution, which I'm sure also depends upon margins, but it seems that SSS is only part of the story when online sales grow by that much. Hopefully they can prune more stores without substantial cost/cash burn. Does anyone else come up with something different? I didn't spend long on the calculation but I think it's correct. Link to comment Share on other sites More sharing options...
Mephistopheles Posted February 5, 2014 Share Posted February 5, 2014 SSS includes online, unfortunately. Link to comment Share on other sites More sharing options...
BargainValueHunter Posted February 5, 2014 Share Posted February 5, 2014 http://blogs.barrons.com/stockstowatchtoday/2014/02/05/jc-penney-do-i-hear-four-bucks/ Mgmt expects in-store assortment to be clear of unpopular “Ron Johnson inventory” by the start of 2Q14. We expect top-line re-acceleration to follow and forecast 6% comps with 400 bps of GM recovery in 2014. After that, we project another 3 years of +MSD comps and steady GM recovery to 38.8% in 2017. But even in this rosy scenario, cash burn continues until 2016. Our estimates yield breakeven adj. EBITDA and $700M cash burn in 2014. We forecast negative FCF and adj. EPS until 2016 and 2017 respectively, leaving little to support equity value at this level. Any shortfall could drive renewed liquidity concerns. http://www.breakingnews.com/item/2014/02/05/jc-penney-may-need-to-raise-400-500-million-as/ J.C. Penney may need to raise $400-$500 million as a financial cushion Link to comment Share on other sites More sharing options...
DCG Posted February 27, 2014 Share Posted February 27, 2014 Up 23% pre-market in a market that no longer cares about earnings. Link to comment Share on other sites More sharing options...
DCG Posted March 6, 2014 Share Posted March 6, 2014 Anyone on here still own JCP? Stock has had a big run in the last couple weeks. Link to comment Share on other sites More sharing options...
VAL9000 Posted March 6, 2014 Share Posted March 6, 2014 Anyone on here still own JCP? Stock has had a big run in the last couple weeks. I bought some. I'm not sure why, but I did. Link to comment Share on other sites More sharing options...
docjake Posted March 19, 2014 Share Posted March 19, 2014 Anyone on here still own JCP? Stock has had a big run in the last couple weeks. I bought some. I'm not sure why, but I did. Good thing you did... it will be $20+ by end of year/early next year potentially... Link to comment Share on other sites More sharing options...
stahleyp Posted March 19, 2014 Share Posted March 19, 2014 Anyone on here still own JCP? Stock has had a big run in the last couple weeks. I bought some. I'm not sure why, but I did. Good thing you did... it will be $20+ by end of year/early next year potentially... Well, potentially it could be $30 or $50...or $1,000. What basis do you have to say $20? Link to comment Share on other sites More sharing options...
Kraven Posted April 5, 2014 Share Posted April 5, 2014 Good article on the behind the scenes situation during the Ron Johnson era. According to the article Ackman was the driving force behind getting better chocolate chip cookies during board meetings. Not "rock hard" ones, but "soft, gooey orbs". http://money.cnn.com/2014/03/20/leadership/jc-penney.pr.fortune/ Link to comment Share on other sites More sharing options...
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