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  • J.C. Penney: In The Long Term, A Lot More Room To Run [View article]
    @Dante,

    I apologize for the abruptness of the last post. For some reason the comment system wiped out most of my post and saved only the initial (much shorter) draft to post.

    Anyway, I'm a bit frustrated since I think you're too much of a politician at times with respect to the JCP debate. Such as:

    - Declaring mission accomplished years before the story plays out.

    - While saying a lot, not really committing to anything that you can be measured against in the short-term.

    - Being nearly always positive about JCP. No matter what the news is, you find a way to put it in a positive light. Such as when you expected $4 billion in Q4 revenue, and it was coming in a couple hundred million below, you didn't even mention you were somewhat disappointed about their growth. Instead it was "JCP did great, they made guidance!"

    - Distorting other people's positions. This probably bugs me the most since I have to spend time correcting you. I've mostly agreed that J.C. Penney can make guidance. I wrote about +5% growth in 2014 before they even released guidance for mid-single digits growth, and noted at the time that J.C. Penney wasn't worth much at that time. Many times I have written about J.C. Penney as a $13 to $14 billion company not being worth its current share price. I am probably going to be wrong about the dilution issue. I can admit that. However, even seven months ago I was talking about J.C. Penney not being worth much if it stabilized operations and got sales back to $13 to $14 billion.... Sure, J.C. Penney at $17 billion is going to be worth a lot more than today. However, you need to admit that a moderate turnaround is not enough and that if growth stalls out at say $13.5 billion, J.C. Penney isn't worth much.

    Anyway, if you don't want to commit to some detailed short-term expectations, I won't bug you about it any more.

    Good luck in your other endeavours, and I guess we'll have to see how JCP plays out in the next months and years. I can't really wish you good luck about JCP though. ;) I do actually hope that JCP turns around enough to not have to lay off any more people though.
    May 25 12:46 AM | 1 Like Like |Link to Comment
  • J.C. Penney: In The Long Term, A Lot More Room To Run [View article]
    @Dante,

    So I guess you're not going to bother writing an article about what your short-term expectations are.

    I'm disappointed as I expected better from you, but I guess you're just a paper tiger.

    Good luck to you.
    May 24 11:25 PM | 1 Like Like |Link to Comment
  • J.C. Penney: In The Long Term, A Lot More Room To Run [View article]
    @Dante,

    I think this might be the third time that you've said that it is game over for the shorts... I'll note that my first ever article about JCP talked about how it was overvalued by historical metrics. Sure, JCP could stay overvalued for a long time, but that's not exactly the greatest investment thesis. Plus, Amazon, Tesla, Chipotle are all leaders in their area. You've said before that it would be great if JCP could be average.

    As I said earlier, I'm challenging you to write an article outlining exactly what you expect over the next few quarters in terms of sales growth and EBITDA, etc...

    It's easy to talk about getting to $1.5-2.5 billion in EBITDA in a few years without going into details about the short-term to see whether things are on track or not.

    If you can't/won't do that, I guess you're not confident about J.C. Penney's trajectory to get there.
    May 24 02:41 AM | 1 Like Like |Link to Comment
  • J.C. Penney: Don't Try To Catch A Falling Star [View article]
    Historically J.C. Penney's margins are 4% higher in Q1 than in Q4. Q4 also include a one-time hit to margins due to discontinued brands. I wrote about that before Q1's results came out, so frankly the margins were a bit underwhelming to me since Q1 is the strongest quarter for J.C. Penney's margins. I will allow that sales were apparently strong, but I disagree about margins being good due to the historical context.
    May 23 04:45 PM | 1 Like Like |Link to Comment
  • J.C. Penney: In The Long Term, A Lot More Room To Run [View article]
    Not to mention that JCP is up +3% since you first talking about it going to $18. You seem to like to declare victory often and prematurely for a situation that won't be conclusively determined for a fair bit of time still....
    May 23 04:42 PM | 1 Like Like |Link to Comment
  • J.C. Penney: In The Long Term, A Lot More Room To Run [View article]
    Basically restricted stock units instead of options. RSUs have become more popular than options due to favorable tax and accounting treatments.
    May 23 04:34 PM | Likes Like |Link to Comment
  • J.C. Penney: In The Long Term, A Lot More Room To Run [View article]
    That's a grant...

    http://jcp.is/1ic94sj;..
    May 23 04:31 PM | Likes Like |Link to Comment
  • J.C. Penney: In The Long Term, A Lot More Room To Run [View article]
    @Dante,

    Facts are that your expectations for $4+ billion in Q4 revenue were quite wrong.

    We'll still have to see about your expectations for +12% or greater comps over the rest of 2014 and $700 million in EBITDA for 2014...

    It would be nice if you could actually put those expectations in print in an article instead of me having to drag it out of you in comments where it is hard to dig it back up and hold you to it afterwards....

    If you are so confident about J.C. Penney's trajectory then write an article explicitly talking about how J.C. Penney will do +10% to +15% comps in 2014.
    May 23 04:30 PM | Likes Like |Link to Comment
  • J.C. Penney: In The Long Term, A Lot More Room To Run [View article]
    @Dante,

    Actually, you were very wrong about Q4 sales expectations for starters. I've had a hard time trying to get you to commit to specific numbers for short-term expectations (as opposed to what happens years from now).

    You did mention expectations for $4+ billion in Q4 sales in your comments. That was off by 6%, but now you're getting cocky because J.C. Penney did about 4% better than many shorts expected in Q1?
    May 23 04:25 PM | Likes Like |Link to Comment
  • J.C. Penney: In The Long Term, A Lot More Room To Run [View article]
    @loudano,

    I think J.C. Penney currently has something like 30 million customers (which sounds like a lot, but is also not enough customers to turn a profit). 150,000 new customers from population growth is about +0.5% (or about +0.17% per year), so basically irrelevant to its future.

    A stronger economy will help..., but it is probably a secondary factor for J.C. Penney's turnaround. May help by a couple percent per year. J.C. Penney needs to string together multiple double-digit comp years.

    As for $100... you know what they say about pigs... J.C. Penney did better than I expected in Q1. Also did much worse than what you expected, so I think your expectations are quite high.
    May 22 10:50 PM | 1 Like Like |Link to Comment
  • J.C. Penney: In The Long Term, A Lot More Room To Run [View article]
    @Fast Lane,

    I think my problem with this particular article is not the positive slant on it, but rather that it takes some rather extreme positions on SG&A and gross margin (and to a lesser extent cap-ex) to support a hyperbolic valuation.

    I believe that Dante could have written it using more reasonable assumptions and still come up with a $30 to $40 valuation at $17 billion in sales.

    Instead we are left looking at a scenario where sales growth is outstanding, gross margin is perhaps the best among department stores (after adjusting for accounting differences), SG&A levels are among the lowest for department stores, and cap-ex is significantly less than the competition. And then to call that kind of performance not that exciting...
    May 22 04:45 PM | 1 Like Like |Link to Comment
  • J.C. Penney: In The Long Term, A Lot More Room To Run [View article]
    Hmm.. You're really stretching things here Dante...

    For starters, the EBITDA to sales ratio you are using is 15.5%, which is much higher than Macy's 13.6% and Kohl's 13.8%. As well, you are assuming that J.C. Penney reaches that level while having sales per square foot that is still about 10% below Macy's and about 15% below Kohl's.

    So somehow J.C. Penney achieves much greater efficiency than Macy's or Kohl's, while having less productive store space...

    Of course you can come up with some tremendous valuations if you assume that J.C. Penney is the greatest department store ever in terms of efficiency. However, that doesn't make for defensible calculations.

    Try using an EBITDA to sales ratio of 13.5% or so. You can still come up with a nice high valuation that way without having to resort to assumptions that JCP is by far best in class to boost your valuations.
    May 22 12:18 PM | 2 Likes Like |Link to Comment
  • J.C. Penney: Why A Turnaround Could Be Worth Less Than $8.50 [View article]
    Sure, I agree that JCP would be worth very substantially more if it gets to $16+ billion. However, it could also complete a "turnaround" to $14 billion and be worth less than it is today.
    May 22 11:57 AM | Likes Like |Link to Comment
  • J.C. Penney: Why A Turnaround Could Be Worth Less Than $8.50 [View article]
    I think you're complicating things too much...

    With 37.5% GM, the equivalent to $17.759 billion in the old JCP is actually $15.36 billion now, not $14.559 billion.

    Here's the calculation:

    2010: $6.96 billion in gross margin
    Now: $15.36 billion @ 37.5% = $5.76 billion in gross margin or $1.2 billion less, matching the change in SG&A.

    Aside from that, Enterprise Value only incorporates a subset of total liabilities... If you want to do things using total liabilities though, you should probably include total assets too. Otherwise you ignore that JCP has over $1 billion less in cash now among other things.

    This is a non-standard way of looking at things, but using your approach:

    2010: Market capitalization was $7.5 billion. Book value was $5.5 billion, so JCP's market cap was $2 billion above book value in 2010 when sales were $17.759 billion.

    Now: Book value at the end of 2013 was $3.1 billion. Market capitalization of $2 billion above book value is $5.1 billion. So when sales are $15.36 billion, market cap should be $5.1 billion = about $17 per share. That's roughly what I'd value JCP at anyway.

    I can agree with the statement that a $15.36 billion JCP is now equivalent to a $17.759 billion JCP before the SG&A reductions, which would make it worth around $17 per share now.
    May 22 01:03 AM | Likes Like |Link to Comment
  • J.C. Penney: Why A Turnaround Could Be Worth Less Than $8.50 [View article]
    @Alphatag,

    The academic study actually indicated that the chance of a lost customer coming back declined by 50% for each year they were away. A customer that was gone for 2 years would have a 25% chance of recapture.

    If that holds true for J.C. Penney, then they have the opportunity to recapture approximately 25% of lost customers right now - so about $1.3, $1.4 billion - putting them at about $13.2 billion in revenue from lost customer recapture.
    May 21 09:14 PM | Likes Like |Link to Comment
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