We all got duped by J.C. Penney

The company played with words to send its stock price higher.

By Jim Cramer Sep 27, 2013 9:46AM

This Monday, Aug. 19, 2013 photo shows the entrance to a J.C. Penney store at a Hialeah, Fla., shopping mall. On Tuesday, Aug. 20, 2013, J.C. Penney reports quarterly financial results. (AP Photo/J Pat Carter)What are you going to do in a situation in which management issues a statement

thestreet logothat a turn is at hand, quelling a certain decline in a stock, and then uses its own rosy projections to offer 84 million shares at a higher price than if it had just kept its mouth shut? Isn't that what really happened at J.C. Penney (JCP) on Thursday?

 

The company, in an attempt to clarify impressions that it might not need money, sent its stock higher with rosy news of same-store-sales projections and then issued equity that you would have thought it otherwise wouldn't need if you took the company at face value.

 

To me, the story stinks, no two ways about it.

 

The betrayal is petty thick here, especially when you see that the company's controller resigns at the same time the offering was filed.

 

I hated J.C. Penney all the way down until the two former insiders, Bill Ackman and Vornado, punted their stock, and I thought it was worth a shot to buy their exit blocks. Many others did, too. In retrospect, while their buys were clearly terrible, their sells look pretty darned prescient at this moment.

No matter that PVH (PVH) CEO Manny Chirico told me on "Mad Money" that apparel had softened dramatically -- apparel being J.C. Penney's mainstay business -- and I tempered my enthusiasm. I said I thought the bottom had been reached and that was wrong, and I have to suffer the catcalls that come with that incorrect judgment. 

 

It happens. I regret the faith I put in management's protestations that business had improved, and I am sorry for trusting them. I am acutely aware that some on the Web are blaming me for their losses, and that's going to happen periodically when you trust a company when it says it has seen a positive turn.

 

I am a big target, and while I do wish people would recognize that I had been negative on J.C. Penney for ages, I feel as had as everybody else, believe me. It's not the first time I believed a management and then the management, in my opinion, led me astray. It won't be the last time, either. Plus, we don't know how this ultimately will play out, but I agree with my friend Doug Kass that this one's about as outrageous as it gets. 

 

Now, barring an actual turn in the fortunes of retail in this country, J.C. Penney could limp through the holiday season, having raised this money in the equity market, but I think it will take a very long time for trust to be restored, especially when the whole group is hated anyway.

 

The most important lesson? Sometimes you just get had.


Jim Cramer

At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, had no positions in the stocks mentioned.

 




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108Comments
Sep 27, 2013 10:14AM
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Hehe Jim;  You aren't including the rest of the world in that all inclusive WE are you?  WE put up with this garbage every day of every week.  Something a little smelly in France when someone like yourself is calling someone else out for boosting their issue.  Perhaps a little envy?, a little jealousy at seeing someone else playing the pump and dump?  It'll all blow over by next week at this time when the new GDP, Unemploymet, and Inflation numbers come out.  WE all know they are BS as well.  Credibility is a sometime thing and WE are not surprised at anything any longer because WE see what YOU people do every day.
Sep 27, 2013 10:25AM
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Jimbo, hey, next time think about doing some real background investigative work on a company's financial status and not just "believing what the company's management told me."
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Poor Cramer...JCP, Radio Shack, SEARS, K-Mart, Mens Warehouse....finished, done, bankruptcy. 
Sep 27, 2013 10:04AM
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JC Penny is doing the same flish flop on the floor that sears has taught everyone.  and it's a stinky fish so don't touch it
Sep 27, 2013 10:47AM
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We Jimmy? That would be you Jimmy. Eventually when the Globally manipulated Markets crash again, you will be singing the same old tune, how did we get duped. Well that's a funny question seeing how you are duping everyone daily.
Sep 27, 2013 11:52AM
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There is no consumer confidence ! The middle class is on a slow walk to the cemetery ! TAKE THAT TO THE BANK AND CASH IT !
Sep 27, 2013 11:16AM
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"WASHINGTON (AP) - A federal housing agency says it needs a $1.7 billion bailout from the Treasury to cover projected losses in a mortgage programs for seniors. At issue are reverse mortgage programs, which allow seniors to borrow against their homes for everyday living expenses. Carol Galante is Federal Housing Administration Commissioner. Galante wrote Congress Friday that her agency will withdraw the money from the Treasury before the fiscal year ends Monday. Congressional approval is not required. The agency insures mortgages for millions of homeowners. It's struggling with $5 billion in losses on its reverse mortgage program."


Be sure you know what this means... Pelosi got the FHA limits hiked to include California estates. The portfolio is obvious a wreck because "Reverse Mortgages" assume a cap value and let the senior borrow it down to compromise. Unfortunately, TRUE values have slid a lot over the past 5 years, shrinking the "borrow window." Add included interest charges and fees and you see here enough Gross Negligence and Willful Misconduct to bring another GSE to it's knees. REAL LENDERS have been job blockaded. WE managed portfolios. College degrees have NO experience or capacity to grasp how that's really done between Twitter responses. It's the end of our nation, folks. Assume this also describes EVERY portfolio of EVERY kind across the nation... run by degrees whose brains are out on constant vacation. 

Sep 27, 2013 11:45AM
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As far as I'm concerned all Retail is Dead ! No retail Stocks for me.
Sep 27, 2013 12:30PM
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Mr. Cramer, how about an article about how the market is trying to dupe investors into  thinking Washington is going to shut down.  We/you know it won't. 
Sep 27, 2013 12:44PM
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you lick these ceo's on your show and your followers lose their shirts......this is nothing new
Sep 27, 2013 11:20AM
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JC Penney's... that 1.5 by 3 inch extra bar code tag on every item isn't JCP... it was put there by the LIQUIDATOR in preparation for their inevitable future. When it was announced that Goldman Sachs had lent to JCP... who DIDN'T assume them dead from either bad management, shark credit from GS or... more likely-- BOTH.  
Sep 27, 2013 3:05PM
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It is a little un-settling to see Sears and JC Penny go down the toilet... It didn't used to feel like Christmas until we visited these stores in the good ole days.
Sep 27, 2013 10:48AM
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Cigs For Sale ! ............... Cigs For Sale ! Step right up folks and get some half price ATF cigs.

 

Get them while you can they are going FAST and FURIOUS !!

Sep 27, 2013 12:20PM
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If a company doesnt need money they dont issue stocks or bonds.  Why pay money to issue more stock if you dont need money?  And why issue bonds if you dont need money (Ford.)  Who in their right mind would borrow money they dont need and pay interest on it for borrowing?

 

These are just 2 examples of accounting lies investors hear every single day.  Ford claims they are doing fine financially but then they turn around and issue new bonds at a higher rate so they can get the current bond honlders with bonds due in 5 years to cash them out and take a new payout at a higher rate over a longer term.  Thats not smart business nor is that what financially sound companies do.

 

Exxon Mobil is buying back their stock at around $10 billion a year.  Thats what a company that is fine financially does, not issue more stock. 

Sep 27, 2013 10:40AM
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Hey Obummer finally found some cash for Detroit maybe he will bail out JC Penny.
Sep 27, 2013 10:30AM
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"I am a big target"

 

Even when he gets had his ego is inflated....  You're a big clown Bobo !  House of Pain !

Sep 27, 2013 10:43AM
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The markets know Washington is not going to shut down, We have been here before. Traders are playing their dishonest games ,,, trying to sucker in the hones investor. 
Sep 27, 2013 12:02PM
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Ah ha!  It was all there in the financials quarter after quarter.

How can anyone have been duped on JCP?

Who relies on management's discussion whether or not to buy/sell?

After all, if it's taking on water, chances are it will continue to sink.  Worked for the Titanic.

 

Only two ways to survive:

a low cost provider

or a niche provider.

 

And JCP is neither.  Only frothy economies allow for a middle ground.

 

Side note:  Consumer confidence down for two straight months -- this may be the second act of the economic contraction that has been delayed for 5 years. The debt cycle, commodity super cycle and business cycle are all converging towards a grand finale. 

 

 

Sep 27, 2013 10:36AM
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Jim, put your thinking cap on and give us a homerun!  If you are too naive to believe a CEO about their personal income as well as the shareholders he represents is not looking out for their own good. 

This is some of the perceptions that was brought on by the fifteen year drought in the stock market.  A few ups and a few downs, overall flat, this is why your under a microscope in the public eye.  Fool my once shame on me mentality.  I believe most of the public is diping their toes in slowly, no one is jumping in. 

 

I would like to see a CEO come on your TV show and get the good ole boy treatment, then hit the sell button with a bat or 2x4 whatever object you would like.  They may bring analysis of the market, we only have to look to WMT right now.  They go and we are heading in the right direction.  It's bad news after bad for that stock. 

 

Sep 27, 2013 4:12PM
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C-nb-c is loaded with hosts that are only concerned with pumping the Books of their guests. Jimmy just might be the worst. That's what happens when your guests are likely your biggest Ad Clients. You really can't trust most Analyst especially since most are saying buy just because everyone else is. Everyone is connected financial in some form or fashion on financial Talk Shows. They care little for the truth and all about keeping the momentum going.  That's how we ended up with the last financial crisis. Folks only wanted to tell the truth, after the fact. Now they want everyone to forget what happened and why.

There is a very interesting Article about Pimco and agency MBS debt. The title,"Pimco shook hands with the Fed and made a Killing. It actually was located on the C-nb-c site. This kind of ties back to how firms like Goldman Created scam Derivatives, then sold them across the Globe as Triple AAA investments, then shorted the ish out them. Yet shows like C-nb-c whine about how Banks are now being wrongfully targeted. Oh Really, the Shills on C-nb-c never state how the Global FEDS are printing literally trillions just to keep the Farce Big Banks afloat. They will never remind everyone that Big Banks were and still are ground Zero for the Financial Crisis.

What reason do folks have to Trust this Globally manipulated Markets. It's a market that has more to do with Computer Programs than real people. It's a Market that has more to do with Global FEDS printing to infinity than Reality. So sure, there have been and may still be gains to be realized. However there is little Reason to hold to Infinity. Far too much corruption and Global Manipulation.

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