It's Just Too Early to Judge.
 |
| Image of one of the "shops" we'll see at J.C. Penney |
There have been many
critics of the strategy that the CEO of J.
C. Penney (NYSE: JCP) Ron Johnson is implementing to turn things around in
a compelling effort to revive the old department store and take it back to a
profitable position it once had.
Herb Greenberg, an
analyst for CNBC placed Mr. Johnson as the 3rd worst CEO of 2012
saying “…over promising and under delivering” was the main reason for this
uncomfortable award. If we take in consideration the fact that Mr. Johnson had
said that a turnaround was not a one year deal but one that will come in
different stages taking up to three years and that 2012 was the very first one
for this effort, then, that statement of under delivering seems inadequate, at
least for now.
As I wrote in an article
that was published on December 10th we have to give management the
time to get everything in place before we judge their performance. I know that
JCP stock have been punished this year so much it has lost about 40% YTD and
about 63% from its 52 week high of $43.18 back in February.
This has been due to
the declining sales over the last few quarters and the deteriorating
fundamentals of the company. I get it! However, as I wrote on an article titled
"Will Coffee Help This Department Store Turn
Things Around?" Even as the
fundamentals are deteriorating, they’re not far (comparing balance sheet info)
from Kohl’s (NYSE: KSS), having the
same cash per share ($2.39) as of the most recent quarter and similar
debt-to-cash and debt-to-equity ratios should give some support to the stock by
the value investors.
Also, CEO Ron Johnson
has given us the numbers –which by the way look promising- from the new and
renovated stores. The “shops” are reporting almost double on
sales-per-square-foot (this information can be found on page 8 of the JCP Q3
2012 earnings conference call transcript available here)
when compared to the old J. C. Penney.
New partnerships are
being announced; Martha Stewart (NYSE:
MSO), a lifestyle content product company, and one that attracts many
customers, is one of them. Starting in 2013 the company has unveiled its “shop”
priorities which include among others; Martha Stewart, Dockers, Haggar, Disney,
Giggle, Carter’s and Sugar Shack.
In a new step towards
this direction, J.C. Penney has hired Brandon Tonniges who was a vice president
of brand senses division at Abercrombie
& Fitch (NYSE: ANF) to become JCP’s director of visual merchandising. Mr.
Tonniges was the person behind the renovation of Abercrombie’s stores, from the
old layout to the one we currently see and some even enjoy. That sense of a
nightclub along with young employees and the constant spraying of the cologne
keep attracting young customers which are the main users of the products they
sell.
The kind of job that J.
C. Penney requires to turn the corner is more complicated than just appealing
to a younger audience, but, we can see how management is serious about it and
that they are gathering all the talent available to make it happen.
Though, it’s still too
early to see if those changes are working or will even work at all, I will give
Mr. Johnson the benefit of time. Big things take time, and this turnaround is
certainly nothing less than big.
If you like my work
please subscribe to my posts at the top right corner of this page.
 |
| Levi's Denim Bar. A redesigned "shop" and fresh new concept. |
Comments
Post a Comment