Conference calls in the Twilight Zone

The management of JCPenney and Groupon failed to address how bad things are.

By Jim Cramer Feb 28, 2013 9:56AM

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The ratio of reality to fiction got some real outliers Wednesday,  the conference calls after earnings from J.C. Penney (JCP) and Groupon (GRPN).

These two calls, which came after some not-so-hot quarters, had the least grounding with how things are really unfolding at these companies that I have heard so far in 2013.


Groupon's amazing. There was no sense whatsoever -- at least in the call -- that things are slowing and that international is a real Achilles' heel. When you have a giant guide down, you lead with it, you don't bury it. Your credibility is shot the moment you DON'T bring it up and then say how you will address the mistakes and the problems. You are just off the rails when you say a terrible quarter is a great one and a hideous outlook bodes well for the future. Both occurred in the Groupon call and it was a head scratcher, to say the least.

J.C. Penney leads with the best things that are happening instead of saying how it can survive with comps down 30%. As Michael Exstein from Credit Suisse said in his "sell" rating summary, this was a "beyond worst case scenario quarterly result."

I think that the salient issue is not if the turn is working, and CEO Ron Johnson insists that it is, but how it can still work and why it is not having an impact on the comp store numbers. I tire of hearing how this product line or that product line can make a difference and instead I want to know how the company could turn off so many of its traditional customers and why they don't care about the new assortments.

Arrow Down Kyu Oh Photodisc Getty ImagesPlus, let's be honest, if Johnson wants to succeed he has to change the name of the enterprise. Yes, the whole enterprise. Scrap the name J.C. Penney. I am not kidding. First, the old customers seem to have turned against Penney even as the turn is going on. So you have lost them already. Second, the new lines of clothes and soon the new lines of home goods are dead on arrival because they are actually sold at J.C. Penney, where people seem to know, instinctively, not to shop. For example, if you buy one of the new Joe Fresh selections, a very attractive line of clothes at J.C. Penney, and tell someone who compliments you and asks you where you got that dress, and you answer "I got it at J.C. Penney," that person will say, "oh." And then they will not even think of going because "who shops at J.C. Penney?"

You change the name maybe people will be confused and go.

Penney's in the same position GM (GM) was against Toyota and Honda many years ago. GM thought it could either reinvent and lose its core older customers or it could just stay the way it was, keep that old customer base and let the Japanese have the newer consumer. In reality that was a false dichotomy and GM didn't need to side with one generation. It just needed to be creative and satisfy both.

Johnson has simply failed to figure out a way to do that. And that's why it's probably time for someone else to try before it is too late because I have never seen any company come back from down 30%-plus comps. He has to own up to how he can and why the company is viable before he talks about how he is succeeding when he isn't.  

I love conference calls. I love managements who start with "OK, numbers bad, here's why numbers bad, here's how we will fix it."

I do not like managements that start out talking about how good the numbers are when we all know they are terrible and then proceed to tell you how things will just get better and better when they are actually getting worse and worse. Those are the managers of stocks I want to sell. Those are the managements, alas, who need to be replaced because they just don't get it and probably never will.

Cramer

 

 

Jim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for Action Alerts PLUS, which Cramer co-manages as a charitable trust and has no positions in stocks mentioned.

 

 

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34Comments
Feb 28, 2013 10:21AM
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The time for serious caution has arrived.  There was a big run up in stocks yesterday and everyone this morning seems to be focused on the fact that the Dow is 90 points away from hitting its all-time high.  But it appears we've likely already reached the top of the mountain.  Those who take a minute to look around and enjoy the view could lose their shirt, and in a hurry.

While the Dow was up 1.26% yesterday, it was done on very little volume, a clear warning sign.  We saw just 107 million shares trade hands - a mere fraction of what it should be if there really is even a modicum of confidence out there.  Big moves on low volume are a strong indication that things aren't as they appear.  It also historically has indicated a shift in momentum.  Buyer beware.

Feb 28, 2013 11:29AM
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Correct again, Brutus. The Dow rose substantially on Fed-accessed funds, not investor money coming off the sidelines. The likes of JCP- (poorly run into the ground without any reason to remain open) and Groupon (irrelevant in today's society), are just the tip of the iceberg. Way too many platforms using the exact same operating premise. In 1983, we lost 99% of publicly traded platforms for the same reason. Time to be pro-active passed years ago. You can't get your act together when the plane ran out of gas and you didn't pack a parachute. Tray tables in the upright position, heads between the legs. Experts weren't on the plane because they saw the fuel gauges and calculated the consumption rate for the duration. Taking a crayon and marking an arrow at Full (Bernanke's whole theory) created smoke and mirrors not real fuel.
Feb 28, 2013 12:50PM
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Cramer, you are certainly in the Twilight Zone thinging GM is the poster child of turnarounds.  Given nearly unlimited funding at the tax payers expense and still manufactures a crummy line of cars.  I am guessing you never drove a Ponitac GTO.  Investing in GM is like investing in the post office.
Feb 28, 2013 11:40AM
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This one is for YOU " ABS"   DIE BANK OF AMERICA DIE !   BLAH  BLAH  BLAH !
Feb 28, 2013 10:42AM
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cramers company the street lost 13 mill last year and has pretty much lost money every year while cramer stilll takes out his options and sells them so he is one of the few people making money from his company --- American business at it's finest ......screw the ciustomers and screw the shareholders.. ........yet he feels he can criticise others !!

Physician heal thyself !
Feb 28, 2013 12:37PM
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cramer should change his name to historian.... since he tells you what has already happened.

he calls this rigor or "his work".....anybody can tell you what has already happened......the genius of cramer is he gets paid for telling you what you already know

Feb 28, 2013 12:16PM
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Cramer said - "I love managements who start with "OK, numbers bad, here's why numbers bad, here's how we will fix it.  I do not like managements that start out talking about how good the numbers are when we all know they are terrible and then proceed to tell you how things will just get better and better when they are actually getting worse and worse. Those are the managers of stocks I want to sell. Those are the managements, alas, who need to be replaced because they just don't get it and probably never will."

Note that he doesn't hold Obama to the same standard.
Feb 28, 2013 10:20AM
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Why anyone would invest in Groupon beats me - They are a failed business model as they only hurt businesses that use their service. If they can't get repeat business they are doomed. Turn out the lights - The funeral is over !
Feb 28, 2013 11:12AM
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sPEAKING OF THE "tWILIGHT zONE"....Could this guy be the new Rod Serling ??

 

I gotta learn to switch off caps....

Feb 28, 2013 12:37PM
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ABS......See you are awakening ??  Riding that Darkie Train again, as usual;  Right Cretin.??

You're not taking enough Meds in that coffee, do I need to call, Ms. Soetoro ?? again...

 

Was writing in CAPS, because I have been trading this morning early...Strike while the iron is hot, and the meat is rare...Even caught CGT1 off guard...He thought I was a manipulator....??

Feb 28, 2013 11:54AM
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This market is running exclusively on the Fed money printing. The economy is going nowhere, and budget talks are bound to end without any agreement. Another rating downgrade is on the way. It may be a matter of how high can the Fed balance sheet go...
Feb 28, 2013 11:28AM
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When a business can just put a coupon in Valpak for pennies and reach whole cities each month, Groupon was DOA the day it came to be.

 

JC Penny, stick a fork in it, give the CEO his golden purchute and call it done.  

Feb 28, 2013 12:29PM
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If you believe a one world economy is the ultimate goal then the american worker must work harder and cheaper. Consequently he will have less disposable income. The view over the horizon means american retailers must react to these changes as well. Weak business models will fade away. The big box retailers with cheap labor goods will  pummel those who dont adapt accordingly.  Investors who fail to recognize this given will get pummeled as well. Consolidation into economies of scale will dictate the winners. Sears and Pennys are remnants of yesterdays business model.  I think when any of us see their logos we just go ugh. But Target. now when I visit their stores they have a much more dynamic feel. But profits will be consolidated as well. Fewer winners and fewer profits to go around will mean lower share prices for local retailers. Big efficient international consolidated enterprises are the champions of tomorrow. Sadly small innovative enterprises on main street will probably struggle. Innovation and new product development is a tough one. Where will long term investment come from when we are all in survival mode?
Feb 28, 2013 5:24PM
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Nothing is made up folks, we call it as we see it, at about 1430 hrs the tide started turning, everyone here noticed it and at about 1535 hrs or so these manipulators called to accelerate the selling and the party was spoiled.....Oh well, didn't expect anything less from these crooks....It wasn't really that bad of a day though...Like we always say, never ever underestimate these cheating scumbags. Tomorrow will be an interesting day to say the least. One thing we know for sure down here, if Romney would have gotten elected the Dow would be at about 15,350-15,500 now...Oh well, no sense crying over spilled milk.
Feb 28, 2013 3:56PM
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Well, a few minutes after 1430 hrs things started to change down here, manipulators getting a bit more confident and starting to do their thing, we dropped more than 30 points on the Dow since...Like we said earlier, be cautious and we still have a lifetime of time left before closing time....We will keep at it but as usual never ever underestimate these cheating crooks.
Feb 28, 2013 2:43PM
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Value versus values.  I think some folks get confused about what is a value and what consists of values.  Unarguable to me high unemployment is a value used to control inflation.   In that with more unemployed workers vying for a limited number of jobs it puts downward pressure on wages.  Is this not a value to be used to relieve pressure to raising wages?  To me maintaining high unemployment is a mechanism to inhibit inflation and also to allow low interest rates for maintaining public debt financing.  The question of whether this is good or bad is a result of individual values.  But as a business decison high unemloyment is a value in that  it can be used to keep wages and interest rates under control.  Discipline in investing to me means keeping your own personal values to yourself.  Business values will make you more money in the long run.   Allowing your personl values to cloud your reasoning and business sense is not optimal in my opinion.  I relate this to the stock market in this regard.  I believe this One World Economy Goal requires maintaining high levels of unemployment to ensure we don't have runaway interest rates. To me it seems a sound business practice.  To many they see this as unAmerican or unsavory from a value perspective.  Too bad!
Feb 28, 2013 12:45PM
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we can't just keep buying more and more toys! 

 

as the population ages, people 'have everything".  then we as a population simply slow down our buying. 

 

we'll likley not see a "recovery" in consumer sales until the last baby boomer dies off

Feb 28, 2013 3:23PM
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New money has been coming in this market this afternoon...Getting close to the all time high....Hopefully we wont head south right after we reach it...We will see....Still over 90 minutes to go...More after the close.
Feb 28, 2013 10:58AM
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JC Penny has a very non-inviting store.  there is nothing that would attract me from walking in.  at best it's a chick store.  woman's' clothing and make up might be visible from the entrance.  PLUS with what, a 20 foot ceiling?  they don't see this as valuable marketing space to indicate what else they may have in their store that i MIGHT be interested in seeing? 

 

if you're going to flounder, at LEAST follow Sears' lead.  they seem to know how to stay on life support for a long time!

Feb 28, 2013 1:22PM
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Steve...I concocted a story about "the herd mentality" in animals a couple days back...

The second part never posted, like ABS says'"computer,MSN problems.."

 

We, although a higher species, haven't changed much in evolution; Some even less, like the forementioned..

We eat at the sound of a bell, or watch the clock, not knowing how to use the Sun..

Many times,(most) we go to the same trough with others, at home or in restaurants..

We travel the migratory paths or game trails, BUT we call them roads and highways..

We gather at places of work to make money..Kinda like grazing or shopping...

One oddity that amuses me is we gather around or gawk when something bad happens, lower animals on the other hand; Take flight...Much safer instinct.

But like animals we go to a place like Wall St., Banks and Casinos to get more something ??

Kinda like fish frothing a pond, or chickens/pigs running to a trough...?

 

One other thing somewhat different, is we expect (nowadays) instant gratification...

Computers, Smart phones, HFT and other Electronic devices to tell us or let us know whether we have done good, bad or are right or wrong...?

Yeah, looking back how far have we really came in a few hundred thousand years ??

Are we moving forward or still looking back, wondering ?

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