I'm glad it did. I sincerely believe you're much better in than out.
As I've already mentioned on this board, I've looked at the historical relationships between the individual quarters, which I believe is more meaningful than looking at YOY data. From 2007 until 2010, inclusive, Q1 sales averaged 67% of the rate of the previous Q4 (actual ratios were 65%, 65%, 67%, and 71%). But in 2014, that ratio was 74%. That amounts to a 10.4% increase over the average, which is dramatically greater than even the rise in 2010, which reflected recovery from the Great Recession. A small variation could be treated as insignificant, but it's my opinion that such a large change can only be explained by a successful turnaround. Since a successful turnaround can only be explained by a change in JCP shopper behavior, i.e. return of the former JCP customers that the bears said would be slow to return, a similar increase should be observed in all quarters going forward. The Q1 increase constitutes a step change that forms a new base to JCP revenue levels. The recent comment by ITG Research is no surprise to me, because it's exactly what my model predicts.
The average ratio for five years for Q2 to Q1 is 101%. So with absolutely no contribution from a continuing recovery, sales for Q2 should come in at $2829. This is over the average analyst estimate. In fact, ITG is forecasting only $2786, even on the back of favorable channel checks. These numbers are much too low. Even with a very small contribution from the turnaround, We are likely to see something on the order of $2850 to $2900. The YOY change, which is more important to the uninformed, will be determined by the Q2 to Q1 ratio in 2013, which was 101%, relative to the ratio in 2014, . So if Q2 comes in at even the low of $2850, the YOY gain will be 7%. A more reasonable result for Q2 of $2900 will give us a YOY gain of 8.8%. So we're probably looking at another good pop with the Q2 release.
Good to have you back Markit.
The WSJ had an article on Thursday about increased demand for retail space and increasing rental rates. As an anchor tenant in many malls, JCP has a considerable advantage now that the economy is improving.
Quote from Fidelity: "Major U.S. financial markets will close early at 1:00 p.m. ET on Thursday July 3, for the Independence Day holiday. The Extended Hours session will be available from 1 - 4 p.m. ET.
All major financial markets will be closed on Friday July 4."
Bad move Markit. This stock has a lot farther to go. I made my first purchase around 10/15/13, and expect to be around for at least another two years.
The turnaround will be successful, that's virtually assured. During the next six months, there will be sporadic, unpredictable reports from various sources all reinforcing the message that JCP is continuing to gain strength. You don't want to be absent when those messages come across the wire.
Sears is going into the final stages of decay; it's not likely to be around two years from now. JCP will benefit because the disaster plan for Sears doesn't appear to include anything that would compete with JCP. Sears is trying to monetize their real estate by subleasing portions of their existing stores, but doing so in a haphazard fashion that will confuse shoppers in much the way that RJ confused the JCP regulars.
Today was an important turning point. Investors are beginning to accept that JCP's turnaround is getting traction. Even Motley Fool is putting out bullish articles. Many shorts gave up and covered today, but they were replaced by others who established new short positions. One day they will be right, but not soon.
With the fear and greed index running deep in the greed region, JCP is benefiting from the overall bullish attitude of market participants. However, there's a large segment of investors that remains negative. This is important for two reasons. The market is not going to top out while such a large percentage remains negative. Secondly, those that are now negative will eventually join the fun because nobody wants to see their neighbor getting rich while they continue to pinch pennies. When the last segment of reluctant buyers finally join the crowd, then we can start looking for a top, but it's probably a couple years off. Be patient and don't cash out under $30. Good things come to those who are patient.
What's important is that we're seeing a sentiment change on the part of investors in favor of JCP. The process will occur in fits and starts, and today's action is only one increment of many to come.
Here's the explanation. The money that was distributed to you and other owners of the mutual fund had been accumulating as income within the fund since the last dividend. For the entire period of time since the last dividend, the fund value has been increasing due to that income accumulation. On the day prior to the dividend distribution, the value of your shares already reflected the income that was to be distributed.
Think of the dividend distribution as an accounting process. On the day of the dividend, 8% of the fund's total value was separated out and distributed to the fund's owners. The total value of the fund was reduced by 8%, and since at that moment in time the number of fund shared didn't decrease, each share was worth eight percent less. It takes a couple days for a distribution to reach the shareholders, two days in your case. When the dividend reached you, it did so in the form of additional shares, purchased by the fund on your behalf at the post dividend price, which was 8% lower than the price before the dividend.
The value of your holdings in the fund had been increasing continuously since the last dividend, so you already had the dividend in your account prior to the dividend issue date. On the day the dividend was issued, an accounting change was made which increased your share count and decreased the share price to compensate. It's completely legitimate.
If you have an automatic reinvestment of dividends, your price per share should have dropped by 8%, and your number of shares should have risen by 8% (give or take daily loss/gain.) If you didn't have an automatic reinvestment, your mutual fund should have decreased in value, and your cash balance should have increased by the same amount. Just as your adviser said, it's a bit difficult to explain. Do you want the long-winded explanation?
Tngenass, good post. I agree with your conditions, and think they are all in the process of coming to pass.
Markit, my comment is based on the belief that analysts will not drive the stock price upward; rather, the increase will be due to recognition by investors that the recovery is taking hold. When you ask how soon it upgrades will come after another quarter of substantially improved results, I question whether a significant percentage of analysts will be prompted to admit they were wrong even after another good quarter.
Yesterday's release by Detwiler Fenton indicating that JCP is tracking ahead of plan reminds me of a similar statement by a JCP supplier during the first quarter. If true, it confirms that JCP turnaround is continuing to gain traction. How much confirmation will it take until the investing public gets on board?
Markit, you have more confidence in the ability of analysts than I. Haven't analysts' opinions been lagging the stock price for a few years now?
The lack luster economy is due to two conditions that neither the Fed nor the US government understands. Firstly, all innovation stems from a new material discovery. I'll give you a couple examples: Stone Age, Bronze Age, Iron Age, Steel, Reinforced concrete, plastics, semiconductors. The last has been almost completely exploited, so additional productivity gains due to new investment in innovation will be very limited. (The success of the Roman Empire has been attributed to their discovery of concrete.)
Secondly, about 3 1/2 cents of each dollar spent in the USA goes to a foreign country, and is returned to the USA for the purchase of treasury securities. No country can survive for long with such a large current account deficit. It continuously drives employment downward below what it would otherwise be, and can only be offset by borrowing more money. Increased borrowing for consumption places the country deeper into debt.
These two conditions completely explain the economy in the USA since 1980, including the fact that the 10yr rate is now lower than most think it should be. All politicians are to blame.
This info is consistent with my projection that Q2 sales will be 8.3% above 2013, and JCP will achieve a gross margin of 35% for the quarter.
If the consumer comes under increased financial stress, many will shift from Macy*s to JCP. In the net, this is good for JCP.
All sales are paid immediately. When a credit or debit card is run, the bank holding the card immediately transfers funds into the merchant account.