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Bill Ackman Stalked By Ghost Of Pershing Square IV As J.C. Penney Implodes

Tyler Durden's picture


There was a time when Bill Ackman, constantly misperceived as a retail investing genius, blew up an entire fund solely dedicated to investing in Target, mostly via calls as in something out of Whitney Tilson's wettest dream (incidentally, another "investor" who could not get enough of JCP at $27), Pershing Square IV (full hilarious letter from Pershing Square Capital Punishment to the PSIV investors here). His current massive investment in JCP is luckily not a standalone fund, but it is now certainly stalked by the ghost of PSIV as JCP literally blew up overnight and any hope of the rumored "10-15 return" that Ackman predicted in the stock has now gone up in smoke. Oh well: there is always the gamble on Procter and Gamble.

From Reuters:

J.C. Penney Co Inc (JCP) reported a deeper-than-expected drop in quarterly sales at stores open at least a year, the department store chain's second straight quarter of severe sales losses since changing its pricing strategy last winter.


Same-store sales fell 21.7 percent during the second quarter, steeper than the 17.4 percent drop analysts were expecting, according to Thomson Reuters. Revenue tumbled 22.6 percent to $3.02 billion, also below Wall Street's low expectations.


In February Penney eliminated the use of coupons and discounts in favor of everyday low prices. The move has cost the 102-year-old retailer many shoppers.


Penney, whose customers are typically more price sensitive than those of Macy's Inc (NYS:M), reported a net loss of $147 million, or 67 cents per share, for the second quarter, ended July 28, compared with a profit of $14 million, or 7 cents per share, a year ago.


The company said it no longer expects to meet its earlier full-year profit forecast but did not give an updated estimate.


Penney last week debuted its Levi's stores, beginning the next prong of a transformation that will eventually see each of its stores carved into 100 separate boutiques.


Despite the dire second-quarter results, Chief Executive Ron Johnson said Penney "will stay the course."

Well of course it will: courtesy of central planners one can now pretend to ignore relaity forever.

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Fri, 08/10/2012 - 07:14 | 2693489 malikai
malikai's picture

Translation: I'm in too deep. Somebody please buy this shit!

Fri, 08/10/2012 - 07:19 | 2693503 GetZeeGold
GetZeeGold's picture



Sure....as long as it's free.


Fri, 08/10/2012 - 07:31 | 2693517 SheepleLOVEched...
SheepleLOVEcheddarbaybiscuits's picture

dont worry, barry O will bail out errrrrbody!

Fri, 08/10/2012 - 11:34 | 2694206 Matt
Matt's picture

"Help Me Obama, you're my only hope" - Ron Johnson, probably.

Fri, 08/10/2012 - 18:09 | 2695558 StychoKiller
StychoKiller's picture

Or, this guy!

Fri, 08/10/2012 - 07:45 | 2693536 slaughterer
slaughterer's picture

Bill Ackman did not make that investment in JCP.  Somebody else did it for him. 

Fri, 08/10/2012 - 08:38 | 2693615 EvlTheCat
EvlTheCat's picture

Spot on translation.

Fri, 08/10/2012 - 08:59 | 2693689 slaughterer
slaughterer's picture

Up nearly 5% in pre-market.  Somebody is buying the Koolaid obviously. 

Fri, 08/10/2012 - 12:10 | 2694324 Panafrican Funk...
Panafrican Funktron Robot's picture

"In February Penney eliminated the use of coupons and discounts in favor of everyday low prices. The move has cost the 102-year-old retailer many shoppers."


For this strategy to work, you have to actually be cheaper than you competition.  They are non-trivially more expensive than Target, and if they don't think Target is their competition, they are dead wrong.

Fri, 08/10/2012 - 07:14 | 2693491 The Wizard of Oz
The Wizard of Oz's picture


Fri, 08/10/2012 - 07:19 | 2693502 Bogdog
Bogdog's picture

It's always darkest before the dawn.

Isn't it?

ISN'T IT???!!!

Fri, 08/10/2012 - 07:47 | 2693505 GetZeeGold
GetZeeGold's picture



They mostly come at night....mostly.




Fri, 08/10/2012 - 07:36 | 2693525 DogOfSinope
Fri, 08/10/2012 - 08:01 | 2693551 orangedrinkandchips
orangedrinkandchips's picture



yes, and althought I dont touch JCP stock or otherwise, I adhere to that phrase......


I know it well personally! lol

Fri, 08/10/2012 - 07:14 | 2693492 duo
duo's picture

Stores that depend on the middle class are doomed.  Nordstrom and Dollar General and Wally World are the future.

Fri, 08/10/2012 - 07:34 | 2693524 Skateboarder
Skateboarder's picture

Mervyns peaced it. When Sears and JCP shut down, you know there is effectively no middle class left. JCP is great - I love $10 flannels at Thanksgiving.

Fri, 08/10/2012 - 10:41 | 2694042 swmnguy
swmnguy's picture

Mervyn's lost it because Target (Dayton-Hudson, at the time), didn't really care enough to figure out how to keep it going.  They used Mervyn's as a minor-league training camp for future Target executives, and wrecked a perfectly good business.

Frank Castiglione thought he might get the Target VP Mktg. job when John Pelegrene retired.  Frank took his eye off of what he was doing at the time and lost it.  Every week a different campaign, it seemed.  And the fact is, not all of middle America wants to be California.  They just want some decent clothes at a decent price.  And of course, Michael Francis had the inside track on that job anyway.

It was too bad.  They had some OK clothes for cheap.

Fri, 08/10/2012 - 07:15 | 2693494 LongSoupLine
LongSoupLine's picture

Couldn't happen to a better CNBC fucktard regular guest.

Fri, 08/10/2012 - 07:28 | 2693511 azzhatter
azzhatter's picture

Yep, I love to see this smug little prick fail

Fri, 08/10/2012 - 07:32 | 2693520 MillionDollarBoner_
MillionDollarBoner_'s picture

He didn't fail. He just "underperformed."

Means he only gets 98% of his bonus this time...

Fri, 08/10/2012 - 07:15 | 2693497 not fat not stupid
not fat not stupid's picture

Johnson's Apple performance was clearly right place-right time, and not boy genius.

Fri, 08/10/2012 - 07:53 | 2693544 slaughterer
slaughterer's picture

Transferring "Apple Store" concept to JC Penney really alienates the coupon Queens that used to stampede through it for deep bargains.

Fri, 08/10/2012 - 07:22 | 2693506 disabledvet
disabledvet's picture

Target stores have done pretty well i thought.http://seekingalpha.com/symbol/tgt?source=search_general&s=tgt quite a dip in 2008..."didn't rest on their death bed" as they say. better the sins of commission than the sins of omission in my book. "failure is a natural consequence of doing business." but Target is proof positive that not all is failure. Are we not to try at all...but simply complain and celebrate failure instead? Sounds like the easy way to me..."the way to give the appearance of being smart"...without in fact being so.

Fri, 08/10/2012 - 07:28 | 2693510 Tyler Durden
Tyler Durden's picture

We are "not to invest 100% of an investment vehicle in one undiversified stock, and add massive leverage to it and even more theta, leading to a 100% wipeout."

Fri, 08/10/2012 - 07:31 | 2693516 Skateboarder
Skateboarder's picture

Casino War is my favorite game indeed.

Fri, 08/10/2012 - 07:27 | 2693509 francis_sawyer
francis_sawyer's picture

Making Ellen DeGeneres your spokesperson was a "no brainer"... (No, Seriously! ~ a "no-brainer" indeed)



Fri, 08/10/2012 - 08:08 | 2693543 GetZeeGold
GetZeeGold's picture



Sir I have an idea.......we could install Chick-fil-A driveups in all our stores.


That's freakin brilliant Jeeves!!! They'll be lining up around the block to get in!


Fri, 08/10/2012 - 09:13 | 2693728 orangedrinkandchips
orangedrinkandchips's picture

but, Chic-Fil-a will serve only the aryaian race!!!


no undesirables allowed!

To prove it, you have to show your Bible it as you yell "white power!" to get your food....


nice marketing move chic-fil-a!!! nice.



Fri, 08/10/2012 - 12:28 | 2694382 hannah
hannah's picture

i always wear my magic underwear when i go to chic-fil-a

Fri, 08/10/2012 - 10:33 | 2694010 ebworthen
ebworthen's picture

Chick-Fil-A drive in and walk-in lines out the door and around the block on August 1st.

jcpenney (all lower case - how chic) trying to be "hip" = same store sales -21%.


Fri, 08/10/2012 - 07:30 | 2693514 MillionDollarBoner_
MillionDollarBoner_'s picture

Don't worry.

O'bummer will annonce the opening of a state-managed General Store next year.

Thinking about calling it General Universal Merchandise or GUM for short.


Fri, 08/10/2012 - 07:33 | 2693521 Dr. Engali
Dr. Engali's picture

I never could understand why anybody thought this tired old brand could be revived. Just like Kmart /Sears they are all destined to die.

Fri, 08/10/2012 - 09:16 | 2693741 bdc63
bdc63's picture

couldn't agree more.

Fri, 08/10/2012 - 07:37 | 2693526 masterinchancery
masterinchancery's picture

The Ship of Fools has steered right into an ice berg.

Fri, 08/10/2012 - 07:48 | 2693540 lizzy36
lizzy36's picture

Ironic that Ron Johnson sold almost 780,000 shares (average price of $41.42) on January 31, 2012 after raising full year guidance on January 26th. 

All's fair in love and insider trading by CEO's.

Fri, 08/10/2012 - 07:59 | 2693550 orangedrinkandchips
orangedrinkandchips's picture


Fri, 08/10/2012 - 08:11 | 2693565 Mugatu
Mugatu's picture

Ackman is overrated.

Fri, 08/10/2012 - 08:19 | 2693581 orangedrinkandchips
orangedrinkandchips's picture

WTF is going on with JCP now? Up 10% in minutes?




but then to Ackman...IT AINT HIS MONEY.....HE SLEEPS WELL AT NIGHT!!!



Fri, 08/10/2012 - 09:01 | 2693690 adr
adr's picture

The same thing that happened to Sears, Kodak, and every other company that took out a position held by a wealthy connected insider. A stealth Fed bailout of the stock to give a higher ledge for the golden parachute jumpers.

Fri, 08/10/2012 - 09:00 | 2693654 Scalaris
Scalaris's picture

Ackman's -long and levered 'till broke or weathered- school of investment.

Seriously though, nobody saw this coming, again.

Fri, 08/10/2012 - 08:56 | 2693677 dwdollar
dwdollar's picture

The parking lot at our JCPenny has been pratically empty all summer.

Fri, 08/10/2012 - 09:11 | 2693723 adr
adr's picture

JCP doesn't have a messiah figure at the head who has believers that follow his every word. That would actually buy the shell of a computer, with no parts inside, for $1000, just because it has an Apple logo on it.

You can't be an ultra smug logo toter with clothes that aren't specific brand. You also can't make a department store work off one product.

Women will pay 6000% higher than actual cost for a plastic Coach bag made in China. Just to tote a logo around and make other women jealous.

Then there is JCP putting out a fall catalog only featuring jeans featuring the most PC collection of models I have ever seen. JCP, the store for blacks, asians, hispanics, American Indians, and one white surfer boy.

Fri, 08/10/2012 - 09:15 | 2693736 razsil
razsil's picture

The JCP "experiment" continues. There is no other way but to keep the course right now. Any change will confuse customers ever more. It may work, but it will take time and commitment.

What Apple has been doing for years is find what people already wanted, but didn't know or couldn't define that they want it. Here, JCP is trying to change people which is much harder, riskier, and takes longer to complete successfully.

It is one thing to be #2 in a great company like Apple, and another to be #1 at less successful but still great company like JCP - From Tuna to Big Kahuna - http://rsilberman.com/?p=156

Fri, 08/10/2012 - 09:31 | 2693755 Shizzmoney
Shizzmoney's picture

He thinks JCP can return 10-15x's?  Not even AAPL is doing this. 

Even in the retail sector, video game sales are down 30-40%......stores that usually do WELL during recessions, b/c younger people and parents with kids are at home more, and spend that money on leisure stuff like restaurants (who have remained flatlined) and gaming.

Part of this is b/c the gaming industry, like all indurstries, are becoming more conglomorated and there is less competition for new games AS WELL AS the fact that discretionary income is about to fall off a cliff.

Some of these Hedge Fund guys must be snorting some really pure shit. 

Fri, 08/10/2012 - 10:17 | 2693956 Fix It Again Timmy
Fix It Again Timmy's picture

Despite the dire results, the Captain said Titanic "will stay the course."

Fri, 08/10/2012 - 10:27 | 2693983 ebworthen
ebworthen's picture

To take a staid conservative U.S. retailer and give it the "bright colors/all lower case/gay spokesperson" treatment was second only in stupidity to going "all-in" on the cocaine fueled Hollywood strategy.

Fri, 08/10/2012 - 10:35 | 2694019 swmnguy
swmnguy's picture

JCP is doing exactly the wrong thing.  People who want to buy clothes arranged in boutiques by designer can go anywhere and do that.  JCPenney shoppers want to go get, let's just say, 3 blue all-cotton oxford button-collar shirts in the right size for a reasonable price.  JCP shoppers don't give a flying fuck what the brand name on the shirts is, or they wouldn't have gone to JCPenney, now would they.  Then they want some black socks, a bag of handkerchiefs, some khakis, and maybe a pair of gloves.  And they'd like all that for about $100.

That's the market niche that's out there to be filled. Maybe it's not that exciting, but the lower echelon is filled (Target, Wal-Mart, TJMaxx, etc.), and the high-end is filled.  Nobody who buys designer shit at Nordstroms, Needless Markup, Saks or Macy's will go to JCP to buy that same stuff.

"Skateboarder" mentioned Mervyn's.  They too filled this niche, until they forgot what they were doing and lost it all.  This middlebrow niche isn't huge like the low-end mass-marketers have, and it isn't glitzy and profitable like the high-end guys.  But there's a way to make an honest living selling decent merchandise at a moderat price to the middle class.  Bill Ackman isn't going to recoup 10x - 15x his investment doing that, but he's more or less a con-man anyway. 

Bill Ackman's latest scam shouldn't be Ron Johnson's concern, now should it.  Nor should Ron Johnson be trying to pretend JCP is Saks or something.  Just sell middle-class people some middle-class clothes, and be happy about it.

Fri, 08/10/2012 - 10:42 | 2694047 1fortheroad
1fortheroad's picture
http://l.yimg.com/a/i/us/fi/gr/lego/sprite_finlego_111121.png); background-color: transparent; background-position: 0px -1837px; background-repeat: no-repeat no-repeat;">http://l.yimg.com/a/i/us/fi/gr/lego/sprite_finlego_111121.png); background-color: transparent; text-decoration: none; background-position: 91px -1910px; background-repeat: no-repeat no-repeat;" title="J. C. Penney Company, Inc." href="http://finance.yahoo.com/q;_ylt=ApaN4zuB0L.GFnyZvWm_u9uiuYdG;_ylu=X3oDMT...">JCP 23.459999 1.36 +6.15%


I thought Knight fixed their algos. WTF


Fri, 08/10/2012 - 13:52 | 2694654 calgal
calgal's picture

Target has been ahead of the curve using "Big Data"....

How Companies Learn Your Secrets


Do NOT follow this link or you will be banned from the site!