The ease with which JCP increased its debt at more attractive terms indicates that lenders are convinced of the value in JCP. Lenders get inside info that stockholders never see.
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.
When I was ten years old I realized that the sales tactics used by most retailers, such as the ones you mention, are intended to deceive shoppers. Since such was the rule rather than the exception, I accepted them and simply moved on to more important matters.
My message to you, JCPboy, is........ GROW UP!
The rumor launched by Benzinga on Friday has been repeated at several venues; however, it's likely to remain a rumor. On the one hand, growth in these economic times is hard to come by, and interest rates are low. Those convinced of the inherent value of JCP would be foolish to ignore the opportunity that it presents. On the other hand, the takeover defense JCP recently installed, plus the value of loss carry forwards, constitutes a major headwind for any suitor. I personally doubt that the board would consider any offer to be acceptable.
Regardless of the difficulties inherent in a takeover, I have to congratulate the shorts that are able to hold their positions. They must have gigantic testis.
Today's price action is driven by concerns over general weakness in the economy, and not anything specific to JCP.
The economy has had a #$%$-poor recovery because of the high current account deficit, which means the USA is spending much more than it makes, and continues to go deeper into debt each year. The debt burden on households is now so great that a vibrant recovery is virtually impossible. About 3.5 cents of every dollar spent goes to foreign countries, and then returned to us as a loan. As a country, we're hemorrhaging at an alarming rate. It can all be traced to our willingness to allow other countries to manipulate their currency; first Japan, and more recently, China.
High interest rates are also virtually impossible, since a consumer based economy with insufficient income to support its debt load would be quickly thrust into recession with any increase in interest costs. The thirty year fall in the 10YR rate exactly correlates with the increase in foreign debt. Current concern over an increase in short rates is reducing the slope of the yield curve, which is always bad for the economy. Since the Fed has an empty quiver, we're looking at a long period of economic weakness in which growth will average between 1% to 2%.
Within the retail sector, JCP will fare better than most. People will focus on getting by, so will concentrate on best value, which is the JCP marketing thrust. Although the market price of JCP stock will vary, perhaps substantially, the financial performance of the company will continue to improve.
JCP had about 50% more shoppers per square foot than the nearby Sears. (Sears looks so bad inside that it gave me the creeps.)
What surprised me was the virtual disappearance of sharply discounted offerings, leading to the expectation that margins will be up for Q2 more than I previously expected. Higher margins mean higher prices per unit, on the average, and thus increased revenue for the same number of unit sold.
We are currently seeing an important convergence of the fundamental and technicals for this stock. On the fundamental side, a successful turnaround is becoming more widely expected. As investors begin to buy based on the potential, the stock price could rise by a couple dollars in the short term.
This fundamental situation has been clearly reflected in the technicals. Some that feel strongly that a successful turnaround will occur are being offset by those that think such a turnaround is unlikely. As a result, the price has been range bound in the neighborhood of $9. Since revenue and margins have been steadily improving, and there is a noticeable lack of bad news, the bears are more likely to give up before the bulls, with a breakout in the stock price to at least $10 likely very soon.
Whether the breakout occurs this week or a few weeks later is likely to depend on news on the economy, international events, and the retailing industry. If it hasn't happened by the time of the earnings release, that will surely do the trick.
Lampert is now stuck in a stock he can't possibly sell. He assumed that Sear's retail business would continue to generate positive cash flow for a long time; whereas, it turned negative long before he was able to monetize remaining assets. He and his close friends hold almost the entire company. They don't dare try to exit because it would crash the stock price, literally overnight. SHLD cash position is now so bad that it can't turn around the business through investment. Since the owners can't monetize the stock, they've turned to selling off the more valuable pieces individually. There seems to be little argument that Sears/Kmart are headed for destruction.
Markets don't generally allow a troubled company to liquidate smoothly. Someone will throw a monkey wrench into the works. Suppliers could move to a COD arrangement, believing that Sears is basically finished as a retailer so not worth the risk. Lenders could cut off additional funds. A large stockholder could decided to cut and run. Interest rates could head up, putting additional stress on the company.
With the current condition of the company and the manner in which the stock is concentrated in a few holders, I would not be surprised if some questionable accounting is eventually uncovered.
Alloro, in all honesty when I think of Sears I think of junk. I stopped shopping there before 1980.
Sears has more successful competitors in all its product areas. If you need appliances, tools, or lawn and garden, you go to Home Depot or Lowe's. Best buy or the net is where people go for electronics. Ashley, Living Spaces, and Bassett are better for home furnishings. Last but not least, JCP is the better provider of apparel and accessories. Sears is an example of the expression, "jack of all trades, master of none."
Quote from Bloomberg released this morning:
"Consumer confidence is by far at its best level of the recovery, at a much higher-than-expected 90.9 in July vs an already very strong and upwardly revised 86.4 in June. July's level is the highest since December 2007 while the June reading is the second highest since January 2008."
This is very good for JCP.
There were many things affecting the stock price on Friday; such as, selling to take profits after earnings, negative feelings toward retail in general, and concern about world events. These factors were then accentuated with computer trading, providing a result that is in no way indicative of the inherent value of JCP stock.
As a retailer which appeals to value oriented shoppers, JCP is actually positioned well going forward. As the USA entered 2009 and the depth of the fiscal crisis, Walmart stock jumped because it was considered to be one of the only beneficiaries of a slow economy. I don't expect such a financial disaster to materialize again soon, but a very competitive economy will drive people to stores at which they believe they can get more for their money, such as JCP.
This argument over MSLO is quite amusing. It all boils down to a fight between two competing retailers, and one should ask whether Macy*s believes JCP is a bigger threat to their business that they have admitted. Regardless, it keeps JCP in the news, which is not all bad.
The finding that JCP interfered with the contract between Macy*s and MSLO could be overturned because one would think that MSLO had the knowledge and intelligence to take responsibility for their own actions. I don't think that anyone at JCP put a gun to their head. In the end, the worst JCP will suffer is compensatory damages of $10 million, and they should be able to recoup that from their directors insurance and the professional liability insurance coverage of outside counsel.
RJ's attempt to sell MSLO products in a store-within-a-store was as big a failure as everything else RJ did.
The world is awash in liquidity. Over the past year, bonds and stocks have increased in price because there's so much money chasing available investments. It's become outrageously stupid, but why and when will it change? What's going to trigger a change?
My sense is that US government debt could cause, or at least be part, of any collapse. The reason interest rates spiked May and June of 2013 is that China and Japan sold a total of more than $1 trillion in US treasury securities over a period of two months. That was likely caused by concern regarding the effects of ending QE. Had the sales been greater, mark to market bond losses would have become severe and created another financial crisis. With bonds of all sorts rising, and interest rates dropping across the board, we are setting the stage for another disaster. I just haven't figured out the trigger, or the route by which it will spread and become uncontrollable.
While my wife was looking for a formal event purse, we visited Macy*s and Nordstorm at Fashion Island. Later we went to Target to pick up some hypoallergenic products for me. Earlier in the week I was in a JCP Home Store in Las Vegas. It was a striking chance to compare shopping venues.
First let me say that I chatted with a sales associate in the Home Store who had been there for 19 years. She talked about the presentation RJ made when he launched his program. During the presentation he said something to the effect that JCP would not have to rely on old ladies for its revenue anymore. How could anyone be so stupid as to make a disparaging comment about both customers and their own employees in one breath? She also said that customers really liked the coupons. That surprised me because I always thought that people saw through the coupon trick, but perhaps I'm wrong.
The JCP Home Store had not been updated, and it showed. If there's one thing that JCP has to do, its to get all their stores looking fresh and bright. I've come to believe that was probably the single positive contribution made by RJ.
Macy*s and Nordstrom were very attractive on the inside, and that made a great difference. Those without a fair amount of money would be put off by the prices, so JCP fills a need for most families. Macy*s had a noticeable number of the little red sale signs that JCP sports everywhere, which came across as tacky in a store hoping that people will think it is high end. One of the biggest lies is that Macy*s is a higher end store. With each day it caters more to average families. Nordstrom also had some sale signs, but much smaller than Macy*s.
Target is like shopping in a warehouse, but it has a couple products I can't get elsewhere. Except for those products I stay away.
JCP reminds me of trying to get a car that's stuck in the snow moving again. With a couple people to push, you rock it forward and back, spinning the tires to move it just a little farther each time. After a few rocks, some grunts, and swearing; you're unstuck and moving forward.