More Broken Promises At J.C. Penney
Disclosure: I am short JCP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Teflon Ron is at it again. On Wednesday afternoon, J.C. Penney (JCP) CEO Ron Johnson led Wall Street analysts on a tour of his company's model store in Texas. The purpose of this tour was to show analysts what a J.C. Penney store will look like after the brand's "transformation" is complete. Each full-size J.C. Penney store will be broken up into 100 brand-oriented shops, with other services being offered in the aisles ("the Street") and a central square. As has become common since Ron Johnson took the helm at J.C. Penney last November, there was a lot of hype involved in the presentation. J.C. Penney stock spiked by more than 10% intraday after Johnson announced that the 12 existing shops have been outperforming the rest of the store by more than 20%. This is a big number and implies that better merchandise presentation (via the "shops" concept) may improve J.C. Penney's results over time.
Unfortunately for J.C. Penney bulls, there was another side to the story. After extolling the success of the 12 shops that have been rolled out to date, Johnson admitted that these improvements have not been nearly enough to turn things around at J.C. Penney. "The last two weeks have been much tougher than we planned," Johnson stated. In light of this statement, the initial announcement that the shops have been outperforming the rest of the store by 20% seems downright misleading. Multiple news outlets reported that the shops had 20% or better comp figures, which would be a very good thing if true. However, it seems far more likely that comps for the shops are flat to down single digits and the rest of the store is down 20-30% (which still tallies to 20%+ outperformance for the shops). READ FULL ARTICLE HERE