There is one question that I have not seen posted recently...given the company's dire need for cash and its willingness to leverage everything it can get its hands on....what is Ackman's tolerance for pain? Each day that JCP goes deeper into debt, prospects for a successful turnaround become dimmer. At what point would Ackman be likely to toss in the towel and follow Vornado? He is already in the red to the tune of $650 - $700 million.
Ok, once again...There is a HUGE factor that you guys seem to forget and that is the old customer base actually coming back to shop JCP. If that happens then all this doom-and-gloom talk is moot.
I believe given the fact that RJ and his crony kids were sent packing was a message to the traditional customer base and that is a big factor that should not be forgotten.
I bet JCP eks its way out of this mess and I am betting on it...
There are no signs the customers are coming back. They have found other retailers. Further, there is nothing unique or compelling about JCP and nothing unique about the merchandise they offer. The current advertising is little more than a reconstituted version of the "Elsewhere" campaign and JCP media weight levels (measured in Gross Ratings Points) are comparatively low when contrasted against competitors.
Another sign that customers are not coming back is the fact that JCP is leveraging everything they can get their hands on (inventory, real estate, RJ's old desk chair, etc.). They are amassing a crushing debt load (reports were that it was costing JCP $250 Million per year just to service the debt load - payments of principal and interest on the debt. And this was before the latest rounds of borrowing...so the figure is now higher).
The only means of regaining their lost customer base is for JCP to implement massive sales and discounting. Since the JCP customer base is, apparently, very price/value oriented, this seems like the only way of luring them back into the store. However, such a tactic, greatly depresses profit margins at a time when JCP is desperate for cash. Companies often use deep discounting tactics to siphon off customers from competitors...however, this tactic is best employed by companies with deep pockets who can afford to sacrifice profit margins for potentially greater market share. JCP does not have deep pockets, thanks to RJ.
Too much of JCP's revenue has to go to cover overhead, pay vendors and service the debt load. RJ put them in a vise and the squeeze is on. Ullman has very little room to maneuver thanks to RJ. In my opinion, this company is looking down the barrel at bankruptcy...which will be disasterous for anyone holding shares.
Ok, once again...There is a HUGE factor that you guys seem to forget and that is the old customer base actually coming back to shop JCP.
I don't think anyone is "forgetting" that factor - - your very next word sums up how much weight everyone is giving it, that word being - "IF"
It's a huge unknown - - a certain amount of customers will return simply because RJ and ilk are gone - - - but to fool yourself into believing they all were only shopping the competition temporarily until that happened is just wishful thinking - - - we're all creatures of habit and don't like change - - so when JCPenney "forced" them somewhere else - - - - they'll have to have a good reason to "change" once again - - - - - - - - - how many - - - that's not a HUGE factor - - it's a HUGE unknown.
If there is an equity offering it will probably sell directly to large investors like Ackman, and it will be a sweetheart deal that dilutes existing common shareholders. If JCP borrows 1B or more it will just add that much more to the list of expenses to be paid.
JCP has a huge amount of expense just to renovate the remaining stores, and after spending millions on that, who knows if it will bring in customers. Last quarter's results didn't indicate their new strategy was working at the completed stores, and now they've brought back management with a proven track record of losses as competitors saw improvements.
JCP is not playing the game to win, they are just racking up huge amounts of debt and playing damage control. If you think business will improve now that high gas prices and higher taxes are hitting the consumer it may be wise to think again. This quarter will suck too.
Everything you posted is true except
"they've brought back management with a proven track record of losses"
Under Ullman the company was turning a profit which had increased from the year before and the sales were increasing both from total and from SSS - - - - then along came the dumbo duo
which I would substantiate with the first pages of the 2010 annual 10K - which was before Ackman accumulated his position and started badgering Ullman about needed(in his opinion) changes which included the installation of RJ - - - that's when the real demise of the company started - - - they thought they could stuff all the bad stuff in to 2011(pre Feb 2012) when RJ "OFFICIALLY" took over annnnnnnnnnnnd they were off to the races.
I think he's in as bad a situation as you can get - if he sells, everybody sees it as "game over" and he gets penny's on the dollar plus losing face and losing peer credibility - - - if he holds, the equity is eaten away every time the shares are diluted with loans or sales of assets - - - - the only way out for him that I can see - he finds some money people - takes the company private - they disembowel the carcass - piecemeal the company off - - - the last thing they're concerned about is, what's left of JCPenney !
Thoughts or other scenarios ???
As usual, I agree completely. If Ackman throws in the towel, investors will rush en masse for the exit doors and JCP will implode upon itself. The questions remains, however, what will be left of the carcass to disembowel? From where I sit, the creditors will have first dibs on everything.
Ackman is in a bad situations, but...it couldn't happen to a nicer guy.
You do not know that he is in the red. His team and game could be quite different from it appears to the public. In the end when the company is sold off for pennies (pun intended) he will IMO move on in search of new prey with the gains from JCP. The losers will be the JCP employees and longs who tried to ride the coat tails of someone who plays a game that they can barely begin to comprehend.
You do not know that he is in the red. His team and game could be quite different from it appears to the public.
Really !!!!! Really !!!!!!! REALLY !!!!!!! what the he11 do you think they make 13-F's for ????
Before he "moves on" in search on "new prey" with his "gains"(snicker snicker" from JCPenney - - - perhaps you should read up on what he did with his gains from his little adventure into TGT - - - so you might try to stop fooling people into thinking you're some type of guru by using phrases like """who tried to ride the coat tails of someone who plays a game that they can barely begin to
comprehend"""" trying to insinuate YOU DO COMPREHEND !!!
Published reports are that Ackman has lost between $650 - $700 million on his JCP adventure so far. Ackman (Pershing Square) are in the red on JCP but not overall. As JCP continues to borrow, the liklihood of Ackman recouping becomes less and less.