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J. C. Penney Company, Inc. Message Board

  • noplacetosit noplacetosit Mar 19, 2013 7:26 AM Flag

    Take up donations...........................

    Ackman’s J.C. Penney Losses Signal Buyout Need: Real M&A
    By Tara Lachapelle - Mar 18, 2013 7:00 PM ET



    Bill Ackman’s best shot at salvaging his investment in J.C. Penney Co. (JCP) is to push the department store to go private before it runs out of cash and loses another billion dollars for shareholders.

    In the 2 1/2 years since hedge-fund manager Ackman became the largest shareholder, J.C. Penney has fallen 48 percent, handing Ackman losses. The retailer is now trading at a 72 percent discount to its $13 billion in annual revenue, the second-cheapest among U.S. department-store chains, according to data compiled by Bloomberg.

    Because J.C. Penney also has the industry’s highest ratio of net debt to market value, a traditional leveraged buyout is unlikely, said Morningstar Inc. Instead, Ackman would need to find buyout firms willing to put up cash for a deal and buy time for Chief Executive Officer Ron Johnson, a former Apple Inc. executive, to attempt a turnaround by converting the department stores into collections of boutiques. Another option is to place some properties into a real estate investment trust, according to International Strategy & Investment Group LLC.

    “Ackman needs to act sooner rather than later,” Sachin Shah, a special situations and merger arbitrage strategist formerly of Tullett Prebon Plc, said in a phone interview from New York. “It’s difficult because J.C. Penney has made so many missteps, burned a lot of free cash flow and sales have dropped. What he really needs are equity backers.”
    Hiring Johnson

    Daphne Avila, a spokeswoman for Plano, Texas-based J.C. Penney, declined to comment on whether the company is considering going private or any other strategic options. Ackman didn’t respond to a phone message or an e-mail seeking comment on plans for his J.C. Penney investment.

    Johnson took over as CEO of J.C. Penney in November 2011 after working at Target

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    • A possible save for this company

      1. Sell real estate
      2. Pay off debt with proceeds
      3. Keep top 500 stores - sublet or break leases - close the rest
      4. Scrap plans for 100 "shops in shops" - downsize plan to a dozen top names
      5. Take company private
      6. Get rid of RJ - - - - oops my bad, that should have been number 1.

    • - 1) 4 dollars in cash - 14$ book value. 2) ACKMAN knows REITS as he also has GGP (General Growth PROP) making up 14% of his portfolio now JC Penney at 8%---- 3) Ackman said he has "complete confidence" in Ron Johnson, the store in store concept work in Wal-Mart and grocery stores
      4, Pershing Square had 39,075,771 shares, or a 17.87% stake, in J.C. Penney, according to Bloomberg data citing a 13F regulatory filing.
      5) expects some progress on sales in the second half -JCPenney has officially changed its mind and will be bringing back all the sales it had assumed customers didn’t want.

      6) opening of 10 new shops
      7) back-to school-season in August along with approximately 50% new product in the stores.

      8) REIT like entity plan draws attention-----ISI Group said the retailer could turn its top 300 stores into a real estate investment trust-like entity that would sublet space to other brands.
      ------- 44% being fried….

      9) In fact, JCP’s balance sheet is equipped to handle even a large decline in sales for several reasons.


      10)more than $800 million of cash at the last quarterly report, $1.5 billion of undrawn revolver capacity, and more than $600 million of non-core assets that it can sell.

      11) generate approximately one billion of operating cash flow in 2012 which will be sufficient to fund its $800 million in capital expenditures for new shop development and other needs

      12) The return could be huge for investors. 2013 should generate large cash flows and profits for shareholders. We look forward to the continued transformation

      13) A REIT could be valued at about $40 a share, with the remaining J.C. Penney business worth about $6 a share, Penney could theoretically transform those top 300 locations into a premium real-estate investment trust under a new name and sublet the space to brands and other retailers that would be interested in paying a below-market rate of $40 per square foot, generating about $1.2 billion of rental income and resulting in $10.8 billion in enterprise value, or $40 a share.


      14) new MODEL- The new entity could operate under a separate name while the retailer’s remaining 800 stores could continue under the J.C. Penney brand using a “traditional discount-driven department store model,” Saad wrote.
      15) Saad listed Ugg, H&M and Calvin Klein among brands and merchants that could be willing to lease space. ISI doesn’t have a rating or price target for J.C. Penney’s shares.
      16) the new utilization of space could turn the company direction and the new ideas could use the shorts as fuel back up 17) dire situation fo shorts- no shares left as institutions own 100% - they must drive the share price up to cover. Volume is huge-cover 18) A store-within-a-store is an agreement in which a retailer rents a part of the retail space to be used by a different company to run another, independent store.
      This agreement is popular among filling stations and supermarkets. Many bookstores partner with coffee shops because customers often desire a place to sit and enjoy a drink while they browse. Companies employing this technique include BP/Amoco Sheetz, Exxon Mobil and Hollywood Video with its Game Crazy video-game boutiques.
      Often the store-within-a-store is a owned by a manufacturer, operating an outlet within a retail companys's store. For example, the American department store Bloomingdale's has had such arrangements with Ralph Lauren, Calvin Klein, DKNY and Kenneth Cole. Neiman Marcus, another American department store, has had them with Armani and Gucci.
      A study by business-school academics found that the arrangement works, because the retailer offers prime locations for which it can charge high rents, the manufacturer makes a higher profit than it would through a wholesale model,and the consumer gets a lower price and better service. The operator of the store-within-a-store can provide these benefits because it receives all profits, instead of having to share then with the retailer, as it would in the traditional split between manufacturer and retailer activities. The study also found that the arrangement works best for relatively non-substitutable goods, like cosmetics and brand fashions.
      19) CEO Ron Johnson is finally making good on his promise to roll out new merchandise.
      20) The Joe Fresh line debuted this weekend at 700 locations
      21) Many of the stories written about JCPenney’s decline have focused on this older group, people with money, older base, how alienated they are. JCP new store in a store concept could cater to hipper younger crowds.
      22) JCPenney can recover from its first mistake. Joe Fresh is a breath of fresh air, but it needs more than just a light breeze. NOW JCP needs to spring into action with major teen niches major brands looking for a distributor.
      23) miracle man gets another try Johnson with a wealth of turnaround experience gained from his time at Apple and target the rental space could be an eye opener.
      24) What a fool I was to miss the Sears boat! Where will I find an opportunity like that again? JCP.

      • 1 Reply to rchites
      • Many upper class stores already have a collections of boutiques. Many young adults have a certain style or look they are after. Some are very loyal to different brands. JCP must nail the new trend for this summer and fall. XMAS is their biggest season and it must be big. Johnson has said that jcpenney has the oldest customer base in retail. Shoppers who are dying off and not being replaced with younger generations. the next move must be for the new trends in merchandise and some of the new jcpenney’s most innovative new brands and concepts.

    • They actually call Ackman an investor? The guy is an absolute idiot.

 
JCP
7.49+0.12(+1.60%)Oct 22 4:01 PMEDT

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