2 floundering retail giants
JC Penney and Walgreen seem to have lost their way, to the benefit of their competitors.
And then again, sometimes you can win by doing nothing, doing nothing but going against flailing and faltering competitors who seem to be flummoxed and floundering in unfathomable ways. Or, to put it another way, you can be lucky enough to compete against J.C. Penney (JCP) and Walgreen (WAG).
On Monday night, J.C. Penney announced the departure of Michael Francis, a key executive who had been brought over from Target to help Ron Johnson turn around J.C. Penney. Francis was part of the dream team that Johnson, late of Apple, put together to reinvent Penney in a fresh, imaginative way and wean its customers off the "high initial markup and then coupon down" strategy that had been Penney's modus operandi.
Johnson is already, I believe, way over his head in this attempted turnaround, one that racked up horrendous comparable-store sales (down 18%) in the most recent tally, and now he intends to take over the merchandising as well as the overall running of the stores.
Frankly, J.C. Penney, while it is still early on under the reins of Johnson, seems to have totally lost its way. Some of it may be because Johnson seems barely engaged. He has yet to move to Penney's Plano, Texas, headquarters. Some of it might be because the company has no raison d'etre. And some of it might be because the store's longtime customers can't understand or fathom what the heck is happening.
The result? There are billions in sales up for grabs, and those sales are going to Target (TGT), to Macy's (M) and to Wal-Mart (WMT). Penney is the gift that keeps on giving, not just to the short sellers but to this troika of very lucky competitors.
As for Walgreen, ever since it declared war on Express Scripts (ESRX), formerly its pharmacy benefit manager, it seems to be all downhill for this gigantic drugstore chain. Customers have been fleeing to competitor CVS Caremark (CVS), as demonstrated by the 9.9% decline in comparable pharmacy sales that Walgreen announced Wednesday.
Walgreen, rather than trying to stem the defections, announced Tuesday that it has taken a 45% stake in Alliance Boots, a gigantic drugstore chain based in the U.K., for $6.7 billion. To which I say, what the heck? Is spending a fortune buying a portion of a global chain of drugstores the way to reverse the defections to CVS? I don't think so.
Retail is a tough business. Going from domestic -- which is, frankly, one of the things I liked about Walgreen -- to international at a time when international could pull down the strongest U.S. company, doesn't make a lot of sense to me, especially when you pay a price per earnings that is much higher than the acquirer trades at.
Going in a host of directions at once, as Penney is trying to do, doesn't make a lot of sense either. Maybe Walgreen and J.C. Penney can pull off these aggressive growth plans. But in the meantime, I say they are terrific reasons to buy their competitors, as their failures and footfalls play right into the hands of the stores right next door to their own operations.
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 is long CVS
More from TheStreet.com
I would still shop at Penney if they had treated their employees right when Johnson took over. However, they tried to change everything in the store including customer service. How can you have customer service when you only have a handful of part time high school and college kids working for you. They treated their longtime employees like they were dirt and have let all of my friends that were fulltime employees go so they could hire part time no show. I will not shop at JCP any longer.
No surprise with J.C. Penney....SOMEBODY TELL THE CEO OF J.C.PENNEY that his bright idea of marketing is CRAP. Us women LOVE, LOVE, LOVE SALES....we know it was marked up and then put on sale but it's just a thing with us, WE LOVE OUR SALES. I went into Penneys on Mother's Day weekend and the mall was packed and all the stores were crowded with buyers because there were wonderful sales going on. I went into Penneys and it was almost empty....I rest my case. They used to have cute clothes and great sales......please bring the old Penneys back before it's too late.
All big businesses follow not lead. In 1983, 99% of all publicly traded businesses subscribed to the same business plan-- We will hoist our brand and they shall flock to our reputation. Well, no one did, and by year-end, most had either went bust, were acquired, consolidated or emerged far less than they were. Only 1% looked out the window and adjusted operations to real world conditions. Further many on auto-pilot had down-sized too. Those went "poof" from a lack of legitimate talent.
Our jobs have been taken away, incomes driven down, opportunities suppressed and families stressed to the max. What... we should shop like nothing is wrong? BIG, is broke. Who wants to go to some big box and see tables and racks full of goods from nations where our jobs were exported to? Who cares if prices are dropping if quality is lacking? There is no reason to go to a big box when you can get ripped off just as easily online and perhaps for less? JCP hired a tech guy to run a retail business. Dump the Board and bring in the old ladies who keep the shelves dusted. I'd bet the farm that the last CEO wouldn't have made the long list much less the short one. A college education is GREAT. Now go start as a sweeper and learn the business before you drive it into the ditch. America is desperately looking for integrity. It doesn't exist anywhere near Wall Street or any Ivory Towers. Hire back the experienced career people who used to make these places great.
One cannot make such a radical change as JCP has done and not expect the reaction that it sees now... Ms customer wants to see that sales sign, that certain % off and that $10 purchase credit that she can use... It's the nature of doing business in this country. No one believes the sign in the store that states the item is on sale... show me!! My wife when she receives that Kohl's letter with the % discount... especially the 30%... she and her friends and my daughters cant wait to go shopping... Is JCP doing same? NO!!
I worked for JCP and it's not the same company I remember... they do not treat their associates the same as former associates... for us old timers, we loved working at JCP, when times were hard, they did not lay off... they had a pension plan, all that is gone...
Bringing outsiders who have no clue about the retail business should have no business leading such a great company. Get rid of the top!! Start fresh and bring some of the old timers back so that they can turn JCP around.
cramer's all american picks right now ETN,CLX AAPL,COST...........DOWN AVERAGE OF .7 PERCENT
TODAY..............MARKET DOWN ONLY .2 PERCENT
his thesis of beating the market with individual stocks is just simply wrong...he can't do it..........
that's why he makes his money selling YOU his newsletter
Need I say more.
and please don't forget mens warehouse that gapped down after cramer picked it......he later
came on his show and apologized but that is part of his scam to make the con believable
don't forget.....with oil at 105 and gas at 3+ he predicted oil at 150 and gas at 5
oil now low 80's and gas less than 3 in some areas.........is he that wrong or was it a pump and dump
oil stocks?......you be the judge......idiot or scam man?
I like JCPenney its not as expensive as Macys and Its better than Kohls or Burlington Coat factory. Walgreens has its problems but given the choice CVS/Walgreens I would definitely go to Walgreens pharmacy.
I used to shop at JCP but their so-called "sale" prices were pretty much baloney anyway. For example, a $44 golf shirt, supposedly "on sale" for $25?? Now $25 is their regular price - all they have done is remove the baloney about having a "sale".
Unfortunately, other discounters (Ross, Marshalls) carry those same golf shirts for $14-$18.
The reality is about competition, not marketing gimmicks.
So - as a male shopper - JCP has gone out of the loop for me. Ladies, there are better bargains elsewhere then JCP......even when JCP has a so-called "sale".
Copyright © 2014 Microsoft. All rights reserved.
Serious issues like drought and the deterioration of the developed world spell opportunity for this industry leader.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.