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Wells Fargo says some J.C. Penney customers gone for good

  • "Taking a step back, this is a company selling product at lower margins than a year ago, and they still can't drive traffic or conversion (both were down), which tells us many of the customers they lost are gone for good," Wells Fargo's Paul Lejuez says, taking a decidedly downbeat stance on J.C. Penney's (JCP +3.7%) quarter.
  • Lejuez also thinks the company's plans to invest in marketing and store payroll may mean the beleaguered retailer will need "additional liquidity next year to funding working capital" if the situation doesn't turn around in relatively short order.
  • Underperform rating maintained. Price target is $10-11.
  • Earlier: Earnings, earnings highlights, heard on the JCP conference call
Comments (11)
  • Transcripts&10-K's
    , contributor
    Comments (698) | Send Message
     
    "Taking a step back, this is a company selling product at lower margins than a year ago, and they still can't drive traffic or conversion (both were down), which tells us many of the customers they lost are gone for good."

     

    Even before the RJ-era, the "regular" customers came to the stores, on average, four times a year; I find it truly amazing that someone would conclude that these customers are gone for forever and will never return after 90 days back into the promotional strategy. Maybe a bit more data / time is needed to make that conclusion?

     

    Of course, analysts generally consider anything beyond next quarter as long term; maybe by "never" he means in the next six months...
    20 Aug 2013, 12:36 PM Reply Like
  • j main
    , contributor
    Comments (197) | Send Message
     
    Let's see, sales down over 30% over a two year period for this quarter. I think that the analyst is understating the obvious. One third less revenue. Do I have to say it again so that it sinks in? The thing with retail is that it is dead easy to lose customers. Not so easy to get them back.
    21 Aug 2013, 12:42 PM Reply Like
  • Transcripts&10-K's
    , contributor
    Comments (698) | Send Message
     
    "The thing with retail is that it is dead easy to lose customers. Not so easy to get them back."

     

    The point is that JCP in the post-RJ era has literally just started trying to get them back; point is that saying they'll never come back after about 90 days maybe just a bit premature.
    21 Aug 2013, 12:56 PM Reply Like
  • j main
    , contributor
    Comments (197) | Send Message
     
    Will JCP be around long enough for them to come back? The clock is ticking and they are bleeding cash. The point is that a 30% increase in sales takes time. I see JCP surviving after a restructuring takes place.
    22 Aug 2013, 04:53 PM Reply Like
  • Transcripts&10-K's
    , contributor
    Comments (698) | Send Message
     
    Well that's an entirely different question; going from $800M in CapEx to $300M will make a big difference. Back to selling cheap junk on discount!
    22 Aug 2013, 07:16 PM Reply Like
  • BarneyGaumer
    , contributor
    Comment (1) | Send Message
     
    JCP has lost its way because they tried to be something they are not. You might as well call JCP "Blue Collar Brands" When I was a boy my mom would take me to JCP to by hushpuppies and underwear, jeans and that sort of thing.

     

    I know retailing has changed a bit since then but I see a marketing trend that I think could/would lure customers back. This is something Hy Vee (a grocer in my area) is using. Use of rewards programs like itunes rewards or fuel saver or store credit points. Also, use of lost leaders with deep discounts and heavy promotion to bring the traffic in. most people I know right now are getting crushed by QE1,2 and 3 due to the erosion of purchasing power against commodities, many clothes are made of cotton and are more expensive now because of QE. Fuel is another wild card. Hy Vee has not only enabled its customers to buy more stuff at their grocery stores, they have also won over allot of new Gas station business. Point is, value is king in this economy.

     

    Lastly, JCP homestore has been a dog for a while now. Spin it off and sell it.
    20 Aug 2013, 03:09 PM Reply Like
  • Alejandro43
    , contributor
    Comments (48) | Send Message
     
    I suggest stepping inside a Penney's store and take a look around. I did so, and I liked what I saw. Happy shoppers, especially back-to-schoolers. Shelves full of fine quality items. And the sales clerks once again had a smile on their faces. What I sensed was turnaround.

     

    PS If I were short JCP, I wouldn't be sleeping too well.
    20 Aug 2013, 03:58 PM Reply Like
  • j main
    , contributor
    Comments (197) | Send Message
     
    I would not short the stock, nor do I believe it will appreciate that much either. Still a very high risk stock.

     

    One of the first things they teach you in retail, "Never throw good money after bad".
    20 Aug 2013, 05:09 PM Reply Like
  • Truth_Investor
    , contributor
    Comments (333) | Send Message
     
    Lower margins? Really? Ron Johnson inflated the prices, and they are still high. JCPenney ran on a fair and square business approach and offered clothing lines that were fairly and competitively priced. RJ tried to turn JCPenney into a fashion store in a bad economy, and lost a majority of their customers because they wanted comfortable and durable clothes at an affordable price over a fashion statement. JCPenney should focus on reclaiming their business from VF Outlet, Marshalls, Ross, Kohls, Target, Walmart, and even Sears, and KMart. JCPenney Survived over 100 years because their business model was depression-proof.
    20 Aug 2013, 11:45 PM Reply Like
  • SA_Member_11523241
    , contributor
    Comments (83) | Send Message
     
    "You've always had the power to go back to Kansas." Glinda's remark to Dorothy can be applied to JCPenney. Like Dorothy, management must learn this for themselves and quickly. The secret of the company's past success has been its generational approach. Contrary to current views, JCPenney won't lose customers as boomers age, it will gain their children and grandchildren. JCPenney's legacy is an important component of its ability to become profitable once again. Back to the future means the best of the past and the possibilities of innovation. To return to profitability, JCPenney must reconstruct its covenant with families, while updating key aspects of the business.
    21 Aug 2013, 04:43 PM Reply Like
  • Truth_Investor
    , contributor
    Comments (333) | Send Message
     
    The majority of the store should be filled with clothing the average person would wear, and can afford...then introduce niche areas that bait those who are willing to pay higher prices for cheese cloth fashion.
    22 Aug 2013, 11:36 AM Reply Like
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