Posted on 11/13/2012 3:34:59 AM PST by tobyhill
J.C. Penny Co. was hit with a downgrade at Credit Suisse as the retailer’s sales continue to slow.
Analyst Michael Exstein lowered his rating to underperform from neutral and cut his target price to US$15 from US$25 after the company reported its fifth straight quarterly loss on Friday.
Mr. Exstein noted that J.C. Penny’s cash position continues to dwindle and it is expected to generate only a minimal amount of EBITDA in 2012 and 2013. The company has already sold US$525-million in non-core assets this year.
“Time is no longer on J.C. Penny’s side, and going into the fourth quarter and beyond, we are concerned that J.C. Penny’s technological overhaul of both its back and front end systems could serve to create an even more challenging internal environment than is the case today,” the analyst told clients.
(Excerpt) Read more at business.financialpost.com ...
Too bad, but it’s their own fault
30 years ago I bought most of kids clothes there. Reasonable price, decent quality. They used to have an overstocked catalogue where I bought most of my clothes for work at incredible prices. If it wasn’t for that, I don’t know what I would have done.
Since the store in my town closed, I haven’t bought anything there in years.
“Sears will be joining them in the dustbin soon after, I’m afraid.”
Sears is owned by Eddie Lampert. He heads his own private equity “investment” firm, not unlike a recent candidate for President of the United States. His investment strategy consists of purchasing tired company, stripping them of assets, firing workers to cut costs and then milking them until they no longer produce cash. His business plan is to flip the company or shut it down and harvest the remaining assets leaving the bondholders and former employees holding the bag. Investment to Eddie is all about putting money into his pocket, not into the businesses he purchases. Forbes estimates his net worth at $3.1 billion and you don’t get that kind of money by reinvesting the cash collected at Sears into freshening up the store.
Early in his career he worked at Goldman Sachs, the large investment bank that profits from selling bonds for the US treasury as well as financing private equity firms and other firms. He is sometimes compared to Warren Buffet, although Buffet does actually allow his companies to reinvest some of the cash they generate into operations. Unfortunately, Eddie is more typical of today’s financier.
Lampert purchased struggling Kmart and Sears. He merged the two companies in 2005 and has been slowly bleeding them of cash and assets, closing store locations and making no investments to upgrade the appearance of the stores. Each year since he has owned them sales have declined. Most locations today are tired and shopworn, understaffed, and thinly inventoried. Low store customer count is another defining characteristic of his stores. So is high management turnover in the organization.
Sears does still own some good real estate. Recently Eddie has started harvesting the real estate without closing the store. The freestanding Sears store at Friendly Center in Greensboro, NC has been dramatically downsized so that part of the store can be leased out for a new Whole Foods store. Perhaps Eddie believes the affluent young premium food store shoppers will stop next door to buy a Craftsman lawn tractor or cheap clothing on the way to or from the grocery. If not, he can shut the remaining Sears portion of the store down and lease it out.
If someone studied the private equity boom in the US over the past 30 years, they would likely find it has been more about stripping assets from viable companies, laying off employees, and offshoring operations in order to make a few raiders such as Eddie Lampert and his Wall Street bankers fabulously wealthy than it has been investing in assets to spur economic growth. For good reasons that study will not be funded and the story will not be written. However, those citizens who have been downsized when a private equity firm purchased their company, or who have eyes and can see the once great firms like Sears reduced to shells, know the truth. The rest will continue to believe the Bain Capital Staples story is typical of the private equity world.
Interesting...
Our local Penneys around Hampton Roads, VA have black employees predominately who probably voted for Obutthead...
When these stores fold, they will be the ones to suffer...
Thanks to their vote...
But we will be supporting them...thanks to their vote....
I don’t think things will end well.
Since JC Penny is a feature in most malls in our part of the world, I habitually walk through Penny because I park on that side of the mall for easy exit to the roads that take me home.
The bottom line is that I’ve really noticed little difference in what they are. Their entire first floor that I see is stuffed full of clothing. Racks and racks of clothing.
If they have any real shortfall it’s that each end of season they still have racks and racks of the same stuff that has NOT been bought that is now at 60-70% off.
The bottom line for JC Penny strikes me as the same for an entire decade....people aren’t snatching up what they’re selling OR they seriously overbuy OR both.
On top of that they’ve alienated an entire group of buyers when they could have just been quiet on the subject.
ALL of the above adds up to a store that’s barely making it.
Our only Sears store is closing. I remember showing my parents what I wanted from the Wish Book when I was a kid; it’s always been a fixture. The store is one of the last anchor stores in our shopping mall; when it goes, the whole place will be on its way to being a ghost town.
re: we are concerned that J.C. Penny’s technological overhaul of both its back and front end systems
= = = = = = = = = = = = = =
Well, since they became big supporters of “back end systems,” I quit shopping there.
re: we are concerned that J.C. Penny’s technological overhaul of both its back and front end systems
= = = = = = = = = = = = = =
Well, since they became big supporters of “back end systems,” I quit shopping there.
J C Penny used to be on every town square like Woolworth.
Now it is rare to see either one. The last local Penny here closed about ten years ago. The nearest Penney is now 40 miles from here and I haven’t been to that mall for years.
Looking at some old 60 year old photos of a town I used to live in showed a J C Penny on the main street. It closed many years ago, long before Walmart ever opened a store. The nearest Walmart to that town is 100 miles away so it was not Walmart that drove them out of business.
“I believe the name of the company is JC Penney.
I may be wrong.”
Yes, friend Forest, you have it a little bit wrong.
The company’s new name is Gay C. Penney.
LOL!
I can remember when the first place we wentwas to Penny’s for linens, underwear, shirts, slacks, everyday work clothes.
Not anymore. Kiss ass with the fruits & kiss this customer goodbye.
I shop for their uniforms online, now, and haven't been back in the store since.
It has been a while, but the last time I was in their store, I noticed they had racks of plus size dresses in hideous florals which reminded me of floral couch cushions only on lighter fabric. I thought "What large woman would want to run around dressed in an old sofa?" No wonder that stuff didn't sell...
Wrong. Their stupid "NO SALE" policy did them in.
Good thing for the economy that we’re not talking about J. C. Penney.
Time apparently has already run out if Mr Ratner’s (and mr tobyhill’s) inability to spell the name is any indication.
JC Penney
“When leadership of an organization begins to focus on new constituencies to the exclusion of its loyal core base the organization almost always loses momentum, vitality and appeal. It is rare when a new strategy delivers new customers more rapidly than it alienates the base.”
Gee, ya think that the Republican party could learn as much, in the wake of last week? :)
As a Wyoming native, I’m sad to see what this successful, small town Wyoming store has become. :(
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