Mastery Wins: JC Penny's Crashes
Back in February, when shares were trading at $41 and change, we penned the article: Is JC Penny's new CEO really a good bet?
Here's what we said: We're not impressed. Our opinion is all the gimmicks in the world won't help JC Penny's in the short term. There is a big difference between selling genius products envisioned and built by Steve Jobs than selling Dockers and Levi's. And Martha Stewart and Ellen DeGeneres, really?
With a P/E of 54, JCP is extremely overpriced at these levels. Who knows, maybe Ron will turn things around a couple years down the road, but in the short term, JCP is ripe for a short. The April $40 Puts are trading at $1.90 right now - if JCP misses and guides down, shares could easily fall back to the low $30's. Just look at the trend of their earnings.
Wow, talk about nailing it. Here's more news from the earnings call:
J.C. Penney Is the New Sears: Ron Johnson Has Done Incalculable Damage, Davidowitz Says The Daily Ticker
J. C. Penney - OUCH!!! at Forbes
J.C. Penney Plummets 17% In Worst Day Since 1987's Black Monday at Forbes
JC Penney tumbles after poor sales at Financial Times
And here's an exceprt from the "Ron Johnson Has Done Incalculable Damage" piece:
J.C. Penney (JCP) shares tumbled Wednesday after the retailer reported a much wider-than-expected first-quarter loss, suspended its dividend and saw weakness across all core metrics.
In an apparent rebuke to new CEO Ron Johnson's strategy to change the company's focus from discounts to everyday low prices, total sales fell 20% while same-store sales declined 19% and gross margins fell to 37.6% from 40.5% as foot traffic in the stores dropped 10%.
"Our marketing isn't doing the work," Johnson said in a conference call. "We've got to get our pricing across. Coupons were a drug, they really drove traffic. [Customers] need to understand the value we're offering."
But it's Johnson, not J.C. Penney's customers, who has a problem understanding what the retailer needs, says Howard Davidowitz, a veteran retail banker and CEO of Davidowitz & Associates.
"He's caused incalculable damage," Davidowitz says of Johnson, who joined J.C. Penney last year after running Apple's (AAPL) retail operations. "The customers are everything. They don't know what the hell he's doing."
Mastery Bottom Line:
It's not game over for JCP, however, they suspended their dividend payments until futher notice. This does not bode well for the share price, and we expect JCP to trade under $20 in the next year.
Best of the Blogs
Scanning and identifying the best blog entries every hour
- Hussman Warns S&P 500 Over-Valuation Now Higher Than Housing In 2006 | ZeroHedge
- Higher Inflation Expectations May Start With Breakfast | Financial Sense
- Elevating Markets: A Signal of Reviving Bank Lending? | Financial Sense
- Ukraine Lieutenant Colonel In Charge Of Crimea Unit Defects To Russia, Takes Soldiers With Him | ZeroHedge
- What 10-Baggers (And 100-Baggers) Look Like | ZeroHedge
- China's Pollution Problem (In 1 Stunning Chart) | ZeroHedge
- Abenomics Crucified With Lowest GDP Since Abe, Worst Current Account Deficit On Record | ZeroHedge
The most relevant financial news and articles from the Internets
- Why Extensive Mental Health Treatment Didn't Stop Adam Lanza | Business Insider
- 10 Things You Need To Know Before The Opening Bell (SPX, SPY, DIA, DJI, QQQ, TLT, TBT, GLD) | Business Insider
- Comedy Club Kicks Female Comedian Off The Schedule Because There Were 'Too Many Women... | Business Insider
- US Profit Growth Is Much Weaker Than Reported | Business Insider
- Why Harry Reid Wants Me To Stop Reading The Budget | Business Insider
- How Friends Can Let You Access Your Facebook Account If You Get Locked Out | Business Insider
- Meet The Secretive 24-Year-Old From Hong Kong Who Is The World's New... | Business Insider