Opinions
Colin Stewart
J.C. Penney
JCP-N
COMMENT
Jul 22, 2014
Stock price when the opinion was issued
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The new CEO has done an astounding job of starting to stabilize this business. He has seen some comp revenue growth and same-store sales growth in the last couple of quarters. This is a very leveraged retailer, which is a dangerous place for investors to be. However, he thinks they will pull it off. He is a bond investor in this company.
She likes to buy companies that are in a bit of trouble or are facing challenges. However, some challenges are a bit bigger than what she would like, and this is what is going on here. Retail in general has been a very tough, competitive environment. You really haven’t seen the consumer come back very much. This company is still in the stage of working through a transition, and a pretty big one at that.
This would be a great candidate for Shorting if he did Short stocks. Retail is a very tough segment. It is specific to the middle-income US consumer. Has a lot of debt on the balance sheet and is struggling with its operations. Slowly starting to turn itself around. There was some improvement on its last quarterly call, but it is still tough out there. Growth seems to elude this company. Until there is some top line growth and some improvement in margin, there are probably better places to be in retail.
Has put this into the category of “too tough to figure out”. Are they going up a lot, or are they going to zero? Had well published issues over the last several years. Still in a turnaround mode, but has $4.5 billion in debt, a lot more debt than equity. Lost money last year and analysts are forecasting they will make a little bit of money this year. Department store business is under a lot of pressure. Wouldn’t Short this because it has a very large Short interest, and if they do surprise and turn things around, the stock could go up a lot in a very short period of time.