Bloomberg News

J.C. Penney Slides for Second Day as Bass Says Sold Stake (1)

December 05, 2013

J.C. Penney Store

J.C. Penney had said revenue would start growing again coming out of the third quarter, and it has backed that up by increasing same-store sales 0.9 percent in October and 10 percent in November, which is the first month of the fourth quarter. Photographer: Patrick T. Fallon/Bloomberg

J.C. Penney Co. (JCP:US), which earlier this week posted November sales that missed some analysts’ estimates, fell for the second straight day after hedge fund manager J. Kyle Bass said he sold his stake in the struggling retailer.

The shares sank (JCP:US) 8.4 percent to $8.85 at the close in New York, bringing their decline this year to 55 percent. The stock of the Plano, Texas-based company fell 4.5 percent yesterday.

“We learned a lesson in perception changing quickly,” Bass said today in an interview on Bloomberg Television. His Hayman Capital Management LP sold out of the shares while still holding the company’s debt, he said.

Hayman in September disclosed it owned 11.4 million shares, or about 5.2 percent of the stock outstanding at the time. The Dallas-based hedge fund then sold about half of its stake by the end of that month after J.C. Penney diluted investors with a share offering to raise cash for its turnaround attempt.

J.C. Penney had said revenue would start growing again coming out of the third quarter, and it has backed that up by increasing same-store sales 0.9 percent in October and 10 percent in November, which is the first month of the fourth quarter. These increases come after same-store sales plummeted 32 percent in last year’s fourth quarter when former Chief Executive Officer Ron Johnson’s changes to pricing and merchandise alienated shoppers.

How Profitable?

How sustainable and profitable J.C. Penney’s sales gains are remains to be seen, Rick Snyder, an analyst for Maxim Group LLC in New York, said yesterday in an interview. In October, same-store sales rose while store visits declined. That means the chain is getting customers to buy more items -- what the industry calls conversion rate -- rather than attracting more people to its stores.

The company didn’t disclose details about store visits, or what it calls traffic, in its statement on Dec. 3 after doing so the previous month. Kathleen Hays, a spokeswoman for J.C. Penney, declined to provide more financial data beyond the press release.

“Unless they start to get incremental customers in the door, a turnaround will be very difficult,” Snyder said.

November also was J.C. Penney’s easiest comparison of this quarter to a year earlier because it was measured against a time when sales were lost to Hurricane Sandy, Michael Binetti, an analyst at UBS AG in New York, said in a note to clients on Dec. 3. The chain got a sales lift from opening at 8 p.m. on Thanksgiving, 10 hours earlier than last year’s Black Friday weekend.

Overstate Recovery

Sales were boosted by “one-time items that abate in December” and “overstate the pace of J.C. Penney’s underlying recovery,” said Binetti, who recommends selling J.C. Penney shares.

The retailer is trying to turn itself around as rivals from Wal-Mart Stores Inc. (WMT:US) to Macy’s Inc. (M:US) pour on the discounts to attract wary shoppers this holiday season. The jockeying for market share will probably intensify after a lackluster Thanksgiving weekend, during which sales rose just 1 percent from a year earlier, ShopperTrak, a researcher, said yesterday.

The Chicago-based firm last week reiterated a forecast it gave in September that holiday sales will grow 2.4 percent, the smallest increase since 2009.

Early reads on November, which includes the Black Friday weekend, point to weak results. A survey commissioned by the National Retail Federation said that consumers reported spending 3.9 percent less than a year ago. Meanwhile, L Brands Inc. and Costco Wholesale Corp. today posted same-store sales for last month that trailed analysts’ projections.

To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net


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Companies Mentioned

  • JCP
    (JC Penney Co Inc)
    • $7.59 USD
    • -0.14
    • -1.84%
  • WMT
    (Wal-Mart Stores Inc)
    • $76.38 USD
    • 0.13
    • 0.17%
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