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As Old Money Leaves J.C. Penney, Will New Come In?

Douglas A. McIntyre

The money that hoped to build back the confidence from investors and customers in the century-old J.C. Penney Co. Inc. (JCP) is now almost completely gone. William Ackman of Pershing Square Capital Management, the largest shareholder in the retailer for quite some time, left the board and sold his position at a loss of about half a billion dollars. Steven Roth of Vornado has left the board as well. He was the second largest shareholder. After their departures, the issue is whether any new money, at the institutional level -- the really big money, will step into one of the riskiest turnarounds of a  large American company.

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The answer to that question seems to be no. The shares continue to tickle their 52-week low, trading at $13.66. The stock is down 30% this year, and with no improvement in sight.

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What new money would need to hope for, and cannot, is that any executive of any caliber can get millions of consumers to return to a retailer that they have fled in droves. The first part of this flight was because J.C. Penney's stores had become old and unattractive to shoppers. The second was because rent-a-CEO Ron Johnson completely changed how the chain priced its merchandise.

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The double-digit drop in same-store sales has triggered a double-digit drop in revenue. J.C. Penney management has not developed the wisdom to shutter dozens of its underperforming stores, which outsiders find amazing. To lure shoppers who have departed for Macy's (NYSE: M), Target (TGT) and another dozen retailers, there is not a single thing J.C. Penney can do -- unless it wants to give merchandise away.  Rarely discussed is that J.C. Penney's drop in online sales is sharper than the one in bricks-and-mortar. That data is buried in J.C. Penney's press releases and SEC filings. In a world in which Amazon.com Inc. (AMZN) continues to grow at a monstrous pace, Internet sales have become a barometer of a retailer's future. In this department, J.C. Penney has none.

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No new money for J.C. Penney, because no money is that stupid.

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