Dear J.C. Penney: What Else Did You Expect?

J.C. Penney’s nosedive may be justified.

Feb 10, 2014 at 8:31PM

Work with us, J.C. Penney (NYSE:JCP). If you want the Street on board and backing your turnaround plan along with a show of support from common investors, you need to communicate what's going on and what you have planned in a more open and transparent manner. Your stock's crash came as little surprise after your latest update. After all, it had some holes in it so wide you could drive a truck through them.

The update
On Feb. 4, J.C. Penney released another financial update which stated that its turnaround plan is on track. Same-store sales hopped up 3.1% for November and December and 2% for the fourth quarter. This was the first quarterly same-store sales gain in two and a half years, and sales rocketed 26.2%. Hurray! But not so fast.

CEO Mike Ullman mentioned that there were "significant headwinds facing all retailers this season" and blamed this in part on bad weather. For 2014, he mentioned that the company is "encouraged" and remains "steadfast." Not a peep about how January is going. Although it's disappointing to not have that information, it's not one of the holes in the release.

Hole No. 1 -- glossing over December
I'm all about J.C. Penney returning from the dead, but a 3.1% gain for November and December ain't gonna cut it. Same-stores sales were already up 10.1% for November, which means December must have been a disaster in comparison for the average of the two months to fall down to 3.1%. I'm not sure a further drop in sales during the most important month of the entire year evidences any sort of turnaround taking place.

Hole No. 2 -- the easy comps
Last year's fourth quarter was something really awful. Same-store sales nosedived 31.7%, and even saw a 34.4% sales plunge. If the company can't even improve upon those horrible numbers, as it seems it didn't for December, it's hard to be impressed. Even sales at, while up over last year's seemingly easy-to-beat sales, were still well short of the $480 million from two years ago, still down 17%. Aren't people shopping online more often than they were two years ago?

Hole No. 3 -- the-everybody-else-is-doing-bad-too argument
As an easy counter-example, look at what may very well be J.C. Penney's most common comparison: Macy's (NYSE:M). While Macy's isn't scheduled to announce its earnings until Feb. 24, the company has already pre-announced some of its results for the holiday quarter. Macy's reported a 4.3% sales rise in the quarter and a 3.6% sales rise for November and December, and stated that the "holiday season was successful."

Hole No. 4 -- why the Jan. 8 press release?
On Jan. 8, in what might have been the world's shortest press release, J.C. Penney said it was pleased with its holiday performance. Back on Dec. 3, the same company stated, "We are all working to maintain our momentum through the Holiday season." Since it's clear that December saw more negative same-store sales, and December makes up the bulk of the holiday season, clearly there was no "maintained momentum." How come J.C. Penney characterized the holiday performance as something it was "pleased" with? Clearly J.C. Penney missed the mark.

Hole No. 5 -- the weather
Soon after I sung the praises of how cold weather actually benefits J.C. Penney, the company used the "harsh" weather as one of its excuses. On the last conference call, J.C. Penney actually credited the severe cold as the cause of the sales spike in November. Macy's, likewise, concurred that cold weather tends to bring in more traffic and sales as people come in to buy coats, sweaters, and other items. Now there's an unexplained shift in sentiment as to what the harsh cold does for sales.

Foolish final thoughts
What more is there to say at this time? The so-called turnaround seems hollow for now, and with no follow-up on how January went Fools should probably wait on the sidelines. It's always tempting to try to time a turnaround that looks "cheap" as J.C. Penney continues to sink lower and lower, but just remember that if J.C. Penney eventually goes under the loss of your investment would still be 100% no matter how "cheap" you buy in. It's a fascinating story that I will continue to monitor with each press release and conference call, and I recommend that each Fool does the same.

Go for real growth instead of excuses
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Nickey Friedman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information

Compare Brokers