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Hedge Funds Buying J. C. Penney

Zacks Equity Research

With Bill Ackman out of the picture, other hedge funds are purchasing large stakes in the beleaguered retail chain, J. C. Penney Company Inc. (JCP).  According to a recent regulatory filing, Kyle Bass’ Hayman Capital has acquired 11.4 million shares or 5.2% stake in J. C. Penney. Alongside, Larry Robbins’ Glenview Capital Management disclosed that it now owns 20.1 million shares or 9.1% stake in the company.

Last week, terming his investment in J. C. Penney a "failure", Ackman sold his entire stake in the company for a huge loss. Ackman had demanded the ouster of the interim CEO Mike Ullman and Chairman Tom Engibous, which backfired, following which he resigned from the company’s board.

Ackman got the support of hedge fund Perry Capital, which seeks to replace Ullman with Ken Hicks of Foot Locker, Inc. (FL). Perry Capital also raised its stake to 8.6% in J. C. Penney.

Shares of J. C. Penney have nosedived approximately 39% year-to-date, reflecting sinking revenues and bigger losses. Moreover, the company is not showing any signs of recovery at least for the near term as it once again failed to meet expectations and went on to report its 7th consecutive quarter of sluggish results on Aug 20th.

The company’s restructuring initiatives have been crumbling and J. C. Penney is constantly lagging its peers, Target Corporation (TGT) and Macy’s Inc. (M).

However, the company has taken several strategic initiatives to drive traffic and conversion. The company brought back promotions, which we believe could be a successful sales driver.

Moreover, the company’s continuous focus on improving its assortments, increase in marketing and selling hours and the reinstatement of the JCP Rewards program could augment store sales productivity, and lead to profitability in the long run.

Currently, J. C. Penney holds a Zacks Rank #3 (Hold). 

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