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JCPuking All The Way To Penneystock Status

Tyler Durden's picture


Across the entire curve, credit spreads on JCPenney are exploding. The curve is inverted with the market indicating an almost 50% chance of default within the next 2 years (specifically in 2014 as opposed to pre-2013 Xmas). The stock price is collapsing further (though we suspect a gaggle of analysts calls to catch the accelerating knife - just as we saw last time). At $6.30, this is the lowest stock price since March 1981, on the back of yet another downgrade (this time with a $1 target) by none other than the same Mary-Ross Gilbert who proclaimed the most recent quarter a success and suggested buying the debt in just August.


The CDS market is not painting a pretty picture for the future of JCP - 2Y CDS implies around a 50% probability of default (based on market standard recoveries - which we feel will be lower gven Goldman's 1st lien...)


and the stock is imploding even more...


Though there's always next week... this analyst hopes so (from Sept 25th):




We’re buyers of J.C. Penney (JCP) on today’s sell-off. Let’s be clear about what kind of call this is, because it’s definitely not for the faint of heart.


We still know nothing about the long-term strategy or upcoming management transition, and are still living with the balance sheet baggage from the past two years.


This is a company with no square footage growth, where the average consumer could care less if it exists or not. (Sounds great, huh?).  But everything has a price.  And at $10, way too much credence is being given to the ‘terminal’ call.


We can say a lot of bad things about JCP, but we definitely don’t think it is terminal and our recent work suggests that much of the business lost is definitely recoverable.


As it relates to liquidity, we think that the only reason why the company would act now is to ensure that it has the best pool of CEO candidates possible (questions around liquidity would otherwise weed out the best candidates).

Here's another analyst from August:

"That's a sequential improvement from the down 16.6 percent in the first quarter. So I would say the numbers are closely in line," Mary Ross Gilbert, managing director at Imperial Capital, told CNBC shortly after Penney released its results. "We were [also] seeing a sequential improvement throughout the quarter. Comp sales were improving throughout the quarter."




"The debt, we think, is a great way to play the bet on J.C. Penney's turnaround," Gilbert said in a "Squawk Box" interview.

but then today...

Imperial Capital’s Mary Ross-Gilbert offers her answer by lowering her price target on JC Penney’s stock to $1, while cutting her rating on JC Penney’s bonds maturing in 2015-2018 to Sell. She explains why:


While we think JCP can be “turned around,” we are becoming increasingly concerned that without a “deep-pocketed” long-term investor providing financial and “halo” support, the company may strategically file for bankruptcy protection to conserve cash while it continues to execute a turnaround in 2014 and 2015. We continue to believe in the viability and sustainability of JCP, which with support from a significant investor and/or stronger than expected financial performance, could deliver equity-type returns (assuming they trade up to the low-to-mid 80s) to investors of the longer-dated bonds while potentially protecting the downside by hedging.


We are maintaining our Underperform rating on the shares, but we are lowering our one-year price target to $1 from $5. Our new $1 price target is based on the notional “option” value of the shares, given our increasing concerns the company may engage in a financial restructuring in 2014.

Meanwhile Citi nailed it:

"The turnaround is taking longer than we anticipated, and we are concerned  about a softening macro environment combined with deteriorating vendor relationships",  and of course "We maintain our EPS ests. but are lowering our target price to $7, down from $11 prev., based on an EV/Sales valuation methodology using our 2015 sales estimate." And it gets worse: "Where’s The Floor? — As a supplement to our EV/Sales valuation methodology, we have conducted a basic liquidation valuation, yielding $324M total value, or $1/share."



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Mon, 10/21/2013 - 15:19 | 4076883 hedgeless_horseman
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Buy the fucking microfibre leisure wear you fucking homosexual dads.

Mon, 10/21/2013 - 15:19 | 4076897 slaughterer
slaughterer's picture

JCP is a great Buffet/Munger value investment.  Surprised the mummies from Omaha have not stepped in and bought 20% of this piece of old-days Americana.  

Mon, 10/21/2013 - 15:30 | 4076934 Pladizow
Pladizow's picture

You down with J...C....P?

Mon, 10/21/2013 - 17:34 | 4077345 Agent P
Agent P's picture

Hell no, not me! 

Mon, 10/21/2013 - 15:59 | 4077035 OldE_Ant
OldE_Ant's picture

All I saw was Muffet/Bunger.. lol

Mon, 10/21/2013 - 16:00 | 4077044 Groundhog Day
Groundhog Day's picture

GS sells the secondary of this piece of shit to unsuspecting muppets......takes a fee

GS then takes that fee and buys CDS for pennies on the dollar

GS then tells piece of shit company's board to do the same...charges them a fee tells them the golden parachutes and the CDS's will make you richer at the expense of the muppets so just play along and take a little heat later for a few weeks or months,  you'll be golfing in no time with other board members looking for your next gig

GS then unleashes the minion ANALyst to put a $1 target and going concern notice

GS cashes out 10 fold from that fee after the company is forced to restructure

GS captures another fee for helping through the bankrupcy process

How does GS has any clients  muppets is beyond me

Mon, 10/21/2013 - 16:51 | 4077214 jcaz
jcaz's picture

Uh, yeah-  may want to take a look at the balance sheet, Sparky-  this is New-Days Americana, where they've already borrowed against every bit of real asset value, and now plead "Gee, what went wrong?  Oh well- time to go BK"

Mon, 10/21/2013 - 15:22 | 4076904 ZippyBananaPants
ZippyBananaPants's picture

Where is the two moms ad?  

Mon, 10/21/2013 - 15:26 | 4076915 NOTaREALmerican
NOTaREALmerican's picture

Re: Where is the two moms ad?

The models were too hot.   It caused inappropriate fantasies in the heterosexual males.

Mon, 10/21/2013 - 15:48 | 4076971 hedgeless_horseman
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We can say a lot of bad things about JCP, but we definitely don’t think it is terminal and our recent work suggests that much of the business lost is definitely recoverable, especially after we got a look at the new lesbian ads.

Mon, 10/21/2013 - 15:48 | 4076985 pods
pods's picture

Knock Knock, towel delivery.

Boom chicka wah wah........

Penthouse letter to follow.


Mon, 10/21/2013 - 15:56 | 4077014 Dave Thomas
Dave Thomas's picture

"Lord, you can imagine where it goes from there."

"He fixes the cable?"

Mon, 10/21/2013 - 16:13 | 4077094 Hippocratic Oaf
Hippocratic Oaf's picture

Anytime you can throw in a 'dude' reference is a good thing.

2 year JCP 6.875's of 2015 offered at a 19% net....................and nobody cares.

Mon, 10/21/2013 - 15:49 | 4076986 Che Guevara is Dead
Che Guevara is Dead's picture

Real lesbians are never that hot.

At least the ones I see shopping at Walmart aren't.

Mon, 10/21/2013 - 15:51 | 4076997 NOTaREALmerican
NOTaREALmerican's picture

Re:  At least the ones I see shopping at Walmart aren't.

You need to hang around in some bucolic college towns for a few weeks. 

Mon, 10/21/2013 - 16:10 | 4077085 slaughterer
slaughterer's picture

Does JCP sell hot lesbians?  Ok,maybe Buffet/Munger are not ready for this.  

Mon, 10/21/2013 - 16:46 | 4077198 Pure Evil
Pure Evil's picture

Generally, its one really hot chick and the other a manish dykish freak.

Mon, 10/21/2013 - 17:41 | 4077365 Agent P
Agent P's picture

Not that there's anything wrong with THAT!!!

Mon, 10/21/2013 - 16:05 | 4077069 Che Guevara is Dead
Che Guevara is Dead's picture

How can you boycott a store nobody goes to?

The nearest mall forces people to walk through JCP to get from one side to the other, and people do walk through. But nobody stops. 

Mon, 10/21/2013 - 16:20 | 4077108 Non Passaran
Non Passaran's picture

How can you boycott a store nobody goes to?

You boycott a store when YOU don't go to it, not others.

Mon, 10/21/2013 - 16:13 | 4077093 pods
pods's picture

That is something I just don't get. People lose their shit about homosexuals.  

Show a couple ads with <gasp> some homos and people trot out the "I will never spend another penny there."

Then promptly go to another store in their righteousness and plunk down their FRNs for some cheap shit made by forced labor in some Bangladesh sweatshop.

We have it way to fucking good here in Amerika if this is what we are worried about.

Slave labor=Okay if the stores selling it have good Christian values (portrayed).

I know two little girls in my kids' school who were adopted by a homosexual couple, and I can tell you this, they are way better off than when where they came.

They could still be barefoot running around the dirt streets of Guatemala if some had their way.



Mon, 10/21/2013 - 16:50 | 4077210 hedgeless_horseman
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They could still be barefoot running around the dirt streets of Guatemala

That is a bad thing?

Mon, 10/21/2013 - 18:36 | 4077512 Widowmaker
Widowmaker's picture

Pull that cock out of your ass and take a look around.

Your Guat kids will be slaughtered in wars and bankrupt.

Fascism loves faggots and faggots love Fascism.

Mon, 10/21/2013 - 20:00 | 4077723 pods
pods's picture

Thanks for the reasoned response.


Mon, 10/21/2013 - 20:29 | 4077804 DanDaley
DanDaley's picture

Perversions (guages, tatoos, self mutilation), hedonism (sex and drugs gone wild), and homosexuality (sorry, but the rectum of Ed was not designed for the member of Fred -and tribal taboos of cultures across the world against such behavior were safeguards against the inevitable infections associated with such behaviors -those that will return with a vengance when antibiotics once again lose their efficacy), are signs typical of societies in their death throes. Just remember, that for liberals and lefties of all stripes, perversions are resumé enhancers.

Mon, 10/21/2013 - 15:30 | 4076932 Freddie
Freddie's picture

WTF?  Is that a JCP ad?  Or a NAMBLA recruitment poster?

Nice carpet.  Who said homosexuals had interior design skills.

Mon, 10/21/2013 - 15:34 | 4076953 B.J. Worthy
B.J. Worthy's picture

JC Pedo

Mon, 10/21/2013 - 15:50 | 4076994 Trimmed Hedge
Trimmed Hedge's picture

I clicked on the pic link & found this...

"Founded in March 2009 by Riese Bernard and Alexandra Vega and still run by a dedicated team of indentured masochists, Autostraddle is an intelligent, hilarious & provocative voice and a progressively feminist online community for a new generation of kickass lesbian, bisexual & otherwise inclined ladies (and their friends)."

Mon, 10/21/2013 - 15:51 | 4076995 GrinandBearit
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I feel sorry for those poor, confused kids.

I hope JCP goes to zero.

Mon, 10/21/2013 - 17:36 | 4077352 Agent P
Agent P's picture

Straight Pants for the Gay Dad...coming to Bravo this fall. 

Mon, 10/21/2013 - 18:40 | 4077474 Widowmaker
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A lot of people have made a lot of good money on this one over the years.

Marketing faggots was the kiss of death on this once great company. Big-city fudgepacking doesn't cut it in flyover America.

JCP is done.

Mon, 10/21/2013 - 15:15 | 4076884 azzhatter
azzhatter's picture

But...but..but Cramer said buy buybuy

Mon, 10/21/2013 - 15:17 | 4076889 SheepDog-One
SheepDog-One's picture

Hey, just means all the more room to pile into FB!

Mon, 10/21/2013 - 15:22 | 4076905 Grande Tetons
Grande Tetons's picture

FB has a p/e of 200. That is a bargain compared to NFLX at 400.  What could go wrong? 

Mon, 10/21/2013 - 15:19 | 4076894 Ruffcut
Ruffcut's picture

Got a putty good stake in this one.

My wife just went there yesterday spying on the big mall store. Not good news, but good news for me.

Oh and where are all the calls for kyle bass? Everyone fucks up once in a while

Mon, 10/21/2013 - 15:23 | 4076908 greatbeard
greatbeard's picture

>> Everyone fucks up once in a while

Not me bro, I do it on a regular basis. 

Mon, 10/21/2013 - 17:37 | 4077356 Agent P
Agent P's picture

+1!  Awesome post!

Mon, 10/21/2013 - 15:24 | 4076912 Magnum
Magnum's picture

What kind of person wants to try on a pair of shoes before buying them? Amazans is for the smart guys.

Mon, 10/21/2013 - 15:24 | 4076913 Osmium
Osmium's picture

It's easy to buy with Other Peoples Money

Mon, 10/21/2013 - 15:30 | 4076930 Caveman93
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Too bad Hasbro and Kenner haz no Starwars or GIJoe's toyz to bailz them outs with Dad's credit cardz!

X-Mas of 81 was the greatest EVA! Got me an AT-AT freaking HUGE! Dad dies still owing on it though plus interest. 

I do miss the Sears and Penny's Christmas Catalogs tho. 

Mon, 10/21/2013 - 15:33 | 4076943 kralizec
kralizec's picture

New JCP slogan: Just Cash Please!

Mon, 10/21/2013 - 15:34 | 4076947 corporatewhore
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to buy the stock is one thing.  to be able to turn it around is a totally different animal.  It isn't capable of being turned around in its present format so you will need to close stores, fire employees, gut it and rethink how you can drive people in to buy crappy Chinese/vietnamese/pakistan products and still make a profit.  Who is your target market?  The aged, infirm, thieves?  The only people currently buying there are coupon mad clearance addicts who patiently wait for the store to give it every quarter or so in their clearance rack sales.  How can you be profitable only selling that shit?  Ron Johnson just expedited the death knell for this company and, to his credit, he did a hell of a job brownie!  JCP is a quagmire that anyone commonsense investor should avoid.

Mon, 10/21/2013 - 15:52 | 4077001 Ruffcut
Ruffcut's picture

don't forget that asshole ackman, either.  You would have to be a fool to invest with that moron. Better to invest with madoff, at least his plan was solid.

Mon, 10/21/2013 - 15:55 | 4077017 NOTaREALmerican
NOTaREALmerican's picture

Re:  close stores, fire employees, gut it and rethink how you can drive people in to buy crappy Chinese/vietnamese/pakistan products and still make a profit.

Well, that's what has worked for every other store in the US for last 40 years,  sounds like JCP should try it too.

Mon, 10/21/2013 - 22:02 | 4078121 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Considering the cliental they want to attract I would consider branching out and selling these for starters.

Mon, 10/21/2013 - 15:36 | 4076955 Seasmoke
Seasmoke's picture

Must hold together for Hannukah shopping.

Mon, 10/21/2013 - 15:47 | 4076976 Che Guevara is Dead
Che Guevara is Dead's picture

Gays don't shop at JCP. Pair dressing couples do:


Mon, 10/21/2013 - 15:48 | 4076984 firstdivision
firstdivision's picture

Once GS says that JCP is a good short, I'm buying it hand over fist, and will loan a couple of kidneys to apply ample leverage.

Mon, 10/21/2013 - 15:54 | 4077013 Ruffcut
Ruffcut's picture

goldass did the new stock offering and already told their muppets to short it.

Mon, 10/21/2013 - 15:49 | 4076989 earnulf
earnulf's picture

Don't think JCP is the only Titanic out there this Christmas Holiday Season, a lot of retailers are praying that the Grinch doesn't come home to roost this year or black Friday may have retailers jumping off the top of their mall stores.     The mall as a shopping point is under increased pressure because folks are tapped out and pulling back into their shells.  The chi-chi might be putting on aires, but the rest of the populace is hunkering down for count.    People are worried, you can see it in their eyes, their walk, their mannerisms, the fact that there are more lookers than buyers.      Halloween's gonna be thin this year and Thanksgiving the last hurrah for buffets for the working class with Christmas looking bleak.     Oh layaway is doing gangbusters and Mom and Pop will do all they can to make sure junior and missy have thier day, but all the joy in Mudville is gone and from the bottom, things are looking pretty bleak indeed.

Mon, 10/21/2013 - 16:18 | 4077099 Hippocratic Oaf
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Xmas would be nice this year, but I prefer to pay the nanny

Mon, 10/21/2013 - 15:52 | 4077002 Bunga Bunga
Bunga Bunga's picture

Who needs JCP when one can get limit free EBT Walmart card?

Mon, 10/21/2013 - 15:52 | 4077004 tekhneek
tekhneek's picture

I think Yellen's got her eye on this one.

Mon, 10/21/2013 - 15:58 | 4077028 tyler
tyler's picture

Situation reminds me of silver.  Yo!  My next post on ZH will be when JCP share passes the price of a shiny round ounce of 99.99% pure silver. 55% JCP shares float.  Squeeze play.  #RealTalk not speculation like who?  with silver.  #RealMoney in 2014.  If the games rigged why not join?

I'll post within 3 months guaranteed or I won't post again.

Mon, 10/21/2013 - 16:10 | 4077084 Cryogenic
Cryogenic's picture

There is so much bs in Wall Street that I think one can turn it in a profitable commodity for organic farming.

Mon, 10/21/2013 - 16:37 | 4077166 Quinvarius
Quinvarius's picture

If the consumer doesn't start getting paid, it doesn't matter what anyone thinks about any particular retailer.

Mon, 10/21/2013 - 16:55 | 4077219 CheapBastard
CheapBastard's picture

jcp is not GM.

...and Quinvarius is correct. I visited a few stores this weekend and they were shockingly empty given this "Robust Recovery."

Even the sections 90% off had only a straggler or maybe two during peak times.

Bleak. Gloomy. Dismal. Dark. Depressing.




Mon, 10/21/2013 - 23:07 | 4078303 jerry_theking_lawler
jerry_theking_lawler's picture

the only reason jcp is bleak. gloomy. etc, etc is because they don't 'finance' their product...


truly unbelievable....i was at the tire shop this weekend for repair/maintenance. i was there approimately 1 hour, saturday, around the lunch hour. the shop received approximately 7 phone calls inquiring on 'rim financing'.  yep, they have it advertised and people are taking them, all with ZERO credit check. just income and account verification and you can walk away with 24" blade (screw those 20" blades, that's old school).  i asked the guy fielding the calls if he knew about the 'terms' or even better the default rate on these loans....he said, 'nope, i just give them a phone number or a website and they will fax him the approval'


I can't afford it..Fucking Finance It (new group moniker) FFI army!

Mon, 10/21/2013 - 18:28 | 4077490 syntaxterror
syntaxterror's picture

JCP obviously has no friends in the ghetto White House or in the Fed whorehouse.

Mon, 10/21/2013 - 19:26 | 4077641 Head_Shots_Work
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Fucking great. Where am I going to get my ...uh exactly what was it they sell?

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