Warren Buffett has been noted as saying that most turnarounds don't ever really turn around, but Peter Lynch considered them to be one of the six categories into which he would group his successful stock picks. Apart from the differing investment styles of the two masters, a turnaround's fate comes down to this: Many times they don't, but sometimes they do.
Retailer J.C. Penney
Part of that focus comes from improving its clothing line. It has inked a new deal with designer Nicole Miller and will be bringing in a men's line in March from Nick Graham, founder of Joe Boxer. That brand has been a strong part of Kmart's
Compared to last year, sales for the quarter were actually off -- $6.07 billion versus $6.10 billion -- but last year included an extra reporting week that boosted numbers. Net income rose to $328 million compared to last year's $253 million loss on the strength of improving gross margins and lower administrative expenses. Turnaround specialist Allan Questrom, who stepped down as chairman and CEO in December, was given much of the credit for the company's reversal of fortune.
Improvement in fourth-quarter results, though, goes to holiday gift cards. At the beginning of the holiday season, many analysts were in a panic as it appeared shoppers were not spending money at any retailers. Wal-Mart
Guidance for 2005 appears pretty much in line with analyst expectations, though first-quarter results look like they may be strong. Penney's is predicting mid-single-digit same-store sales for February and low single digits for the quarter.
The company has turned around so well that it is now on the lookout for expansion possibilities. With $2.5 billion in cash available, it plans on being aggressive in buying properties if the price is right. It ended the quarter with $4.7 billion in the bank, but subtracted out $1.6 billion for a now-completed share buyback and has earmarked another $600 million for future buybacks.
At a forward multiple of just 14 times the high end of guidance, J.C. Penney's stock might just be the thing to turn around an investor's portfolio.
You can read more about the successful turnaround at the 100-year-old retailer: