Buy the one Ackman should have
The buffoonery of Ron Johnson opened the floodgates for every other retailer.
Should we care about J.C. Penney (JCP)?
I think you need to care about any large retailer that is on the precipice. Any company that employs thousands of people and used to have $19 billion in revenue is worth following as that's a visible chunk of the U.S. retail economy.
Of course that's not the principal reason it's been so talked about. We have cared because Ron Johnson, a fresh face from the outside -- from Apple (AAPL), no less -- came in to clean up the mess made by former CEO Mike Ullman -- at least that's what the new party line was -- at the behest of a hedge fund manager Bill Ackman, who had basically taken over the company.
The daring -- some people would say the arrogance -- of Johnson and his backer Ackman created a polarizing set of expectations that led to the total failure and collapse and the ultimate comeuppance -- Johnson's being fired, only to be replaced by the allegedly disgraced Ullman.
All that is history now, and while we can speculate about how this debacle may have hurt the performance of the self-promoting Ackman, who cares? What matters right now is that there's a land grab of retail sales as I genuinely believe that J.C. Penney could go away. I don't want it to go away, but the buffoonery of Johnson opened the floodgates for every other retailer.
So how do we play it? First, I totally dismiss the notion that J.C. Penney is worth buying, which is something I heard in conjunction with talk of a private equity takeout. These rumors don't take into account that the debt instruments surrounding J.C. Penney are signaling that the cash flow is dropping, perhaps precipitously here, at a moment where Penney has, most recently, $930 million in cash vs. $2.9 billion in debt. That's totally unsustainable given the minus 30% comp numbers, numbers that can't easily be reversed by Ullman. You can't own the common stock. It is still a sell, and I think even Bill Ackman knows that because this is precisely the kind of company he would be selling short if he weren't so darned long.
The biggest winner has been Macy's (M), and I think a huge chunk of what is left in sales will still go the way of that chain.
Wal-Mart (WMT) and Target (TGT) have gained, but the newfound sales may not be as meaningful to them. Both have been doing fabulously, and Wal-Mart again hit its 52-week-high. It's been an amazing performer. I also like TJX (TJX) -- my charitable trust owns it -- which I find to be similar to Penney's both in the sales it runs and in the merchandise it sells. It should be bought here.
Kohl's (KSS) should be a big beneficiary because of its similar merchandise, but that once-terrific growth retailer seems to have lost its way. I think that Gap (GPS) works too, as its clothing profile is very similar to the clothes that Penney sells. Go check Penney out, you will agree.
I worry about PVH (PVH) because it is a big partner of Penney, although I know that Manny Chirico, the terrific CEO, is never going to let himself be held hostage. But if Penney is doing as poorly as I think, then anyone who has sent them merchandise is at risk.
Why is this a major focus right now? Because we are going to get same-store sales from all of these retailers and we know from Manny Chirico that March was soft because of cold weather. So you may get your chance to buy these after we hear the numbers.
To me, the cheapest of all of these is TJX. It just boosted its dividend by 26% and announced a buyback of at least $1.3 billion. Put simply, it's the one Ackman should have bought. He didn't. But you can.
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 TJX.
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this all goes to show that the "financial formulae" people (classic MBA's) don't know jack about how to run a retail store.
it's a chick store! guys don't buy there! it's not inviting and only sells clothing and make up!
Hey! First Lambert(sp?) at Sears & now this guy from APPL at JCP. It appears that managing retail does require some special skills. (OMG, whatever happened to Montgomery Ward?)
A Clue: Years ago a friend in marketing at Sears noted that strip malls were hurting them because single focused stores there went head to head with one of their departments in a big store. Multiply that by many strip malls...get the idea.
That doesn't hold up entirely as the big guys spent several decades driving small & medium sized guys to the wall.
Clearly, a host of smart & rich people would dearly love to solve this puzzle.
LOM is like a drive-by shooter these days.......... What does that tell you?
Watching this market reminds me of the old Chuck Berry song, "Go Johnie Go". Looks like 4 L. of Moneys' 15,000 prediction is just about to come true.
The Obuma budget proposal (only took 4 plus years)
Full of tax increases and even more stimulus for beggars , the "grand Bargain", taxing SS
The 88,000 new jobs "created" each month , coupled with the 250,000 deadbrats going on disability every month ?
This summer of recovery has truly been a thing of beauty !
JCP needs to fire all it's US workers.
They need to set up an internet store selling direct from the Orient and hire a bank of order takers from the Orient who can barely speak english to take orders from the older ones of us who can not order on line.
Then convince the Chinese government to force our government to allow a very low cost Chinese postal carrier to take over the US Post Office and kick the USPO pension plan to what ever that government agency that handles bankrupt companies.
Then JCP can ship anywhere in the USA from China for like 5 cents a cost lower than anything Fed Ex or UPS can ship for.
And as there will be no high paid Americans working for JCP anywhere in the world they will have like 1000 percent profit margins.
A true win win win situation thousands of JCP workers will get to relax at home on government paid unemployment checks and when those run out government welfare and food stamps and never have to work another day in their lives.
The US consumer will get a $1 dollar dress made in China for only $50 instead of the higher $75 offered by Amazon.
The US Post Office will be saved and run by Chinese who are not needy and will not make more than $2,000 a year and will not even know they should be getting a pension. Billions saved making the US deficit decrease to zero in a mere five years.
The retired and newly fired US Postal workers will be taken care of by the government agency that handles bankrupt company's pension plans and get about $55,000 a year in pension. Enough to live like super rich people.
The removal of thosuands of JCP employees and tens of thousands of USPO workers from the labor force will push the unemployment rate down below 6 percent.
This will allow the Federal Reserve to quit QE3 and start to jack up interest rates to 20 percent which will help retired people as their CD's will start to earn 10 percent interest.
The economy will start to grow at an 8 percent rate as inflation will hit upwards of 25 percent.
Yep this move will be a win win win situation for every one.
VL - do you EVER STFU ?
I never saw a cretin with more opinions and pontificating posts.
She can't rub 2 nickels together , however she's a
Real estate expert !
A retail expert !
A clothing manufacturer !
A banking expert !
Hello - Let the medication do it's work, breathe deeply.
You are not any of those things, just another loser on the dole, posting drivel.
LOL @ U
Total envious losers
solely buying CDs and insured Munis, considers
yourself capable of commenting on anything
financial at all?
Not that I have anything against that, but its like
asking a kindergarten kid to pronounce judgments
about high school pre-calculus or world history.
You really should have your own column. And that's
the best thing I can say today, so its off to the fast
food joint to set up my snot and spit for ABS next
'turkey' burger...Har har ha...Come and get 'em , ABS.
All other human beings have a great day!
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