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Jan Rogers Kniffen

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  • J.C. Penney: What To Do After Today's Massacre [View article]
    The following quote is excerpted from a report on JCP's 4Q results written by a top Wall Street Sell Side analyst. After I read it, I said, "Who would think that this paragraph could be reviewing the results of a retailer whose stock is down double digits on the news?" The market is an interesting animal!

    "Three positives out of the quarter: 1) Solid top-line: JCP delivered a +4.4% comp driven by +MSD transactions and roughly flat transaction value (higher average unit retail, lower units per transaction). January was the strongest month and management noted February is running above +MSD plan (we estimate +6-7%). Non-clearance merchandise comped +8.7% during the quarter; 2) Normalized clearance: JCP delivered a 33.8% GM, +540 bps y/y, which was driven by less clearance selling as well as a positive clearance margin for the first time in two years; and 3) Inventory: The sales-to-inventory spread was +12.6%, and inventory declined 9.6% y/y. JCP worked down inventory throughout the year as expected. "
    Feb 27, 2015. 10:25 AM | 5 Likes Like |Link to Comment
  • ModernGraham Annual Valuation Of Macy's Inc. [View article]
    Among other things, I taught finance to graduate students for many years. One of the projects I would assign was a financial analysis including a stock recommendation on a publicly traded company. The night we began, I would say, "if anyone tells me that there is a problem with a Fortune 500 company who has a strong long term credit rating and an iron clad credit facility because of a poor current ratio, I will fail him or her on the paper...write that down..." Unfortunately, you just failed. (Remember, there are whole groups of people at every major retailer trying to do ever more business with ever less working capital in order to improve ROI. Healthy companies with intentionally low current ratios, are healthy companies improving their return to the investors...not companies going broke.)
    Feb 13, 2015. 03:01 PM | 1 Like Like |Link to Comment
  • Was Acquiring Stuart Weitzman A Bad Move For Coach? [View article]
    C'mon folks, there is no idle cash here. The company is, in fact, going to borrow money to do this, and they said so in the announcement. Second, having done a few acquisitions in my time...Associated Dry Goods, Foley's, Filene's, Strawbridges, ZCMI, and Marshall Fields, only to name a few, I am telling you that the method of purchasing a company by an entity with plenty of uses for cash, equity, and capital, in general, from paying down debt, paying out dividends and repurchasing stock, not to count capital spending, does not make the deal cheaper for the shareholder. Beyond that, Coach had to outbid Brown Shoe, the natural strategic buyer, to get the deal. That is almost prima facie evidence that they "over paid." And, they are doing this deal at a time when the turnaround, if it ever happens, is far from accomplished. Coach may be the US equivalent of LVMH someday as they roll up aspirational brands like LVMH did with designer brands, but they have to fix Coach first. I like what Stuart Vevers has done with design, and I like that Coach is taking the hits necessary to rebuild the business. I still have a hard time arguing that SW at this time at this price is a good idea.
    Jan 27, 2015. 09:54 AM | 1 Like Like |Link to Comment
  • Was Acquiring Stuart Weitzman A Bad Move For Coach? [View article]
    "Coach can subsume Stuart Weitzman without incurring any debt which in turn makes the target company an asset at minimal cost therein."

    Let's be accurate about one thing here. The fact that a company does not have to borrow to acquire an asset does not make the asset cheaper. That bullet point in the opening of the article caused me to skip the rest of the analysis. "Subsume" and "therein" were a bit off putting as well.
    Jan 23, 2015. 04:26 PM | Likes Like |Link to Comment
  • Update: J.C. Penney Announces Another Round Of Store Closures [View article]
    Actually, a closure of 300 stores is not unrealistic. JCP did 33 last year and 40 this year. As they say 70 here, 70 there, pretty soon you have 300 closed. My guess is that the new CEO will be much more aggressive on getting rid of "bad" stores than Mike has been, and Mike has actually announced 70 on his watch. A total of 300 over the next couple of years including the 70 or so already announced is certainly not out of the realm of the possible. On the other hand, a merger with Kohl's seems totally unrealistic. Kohl's runs a "junior" department store format in 89,000 square feet with only the "high turn" components of a department store business. Penney is a fill line department store in a mall based format, Kohl's is off mall almost exclusively. Kohl's has one of the best credit ratings in retail with low leverage, a dividend, and stock buybacks...hardly the Penney story today. No way a merger happens with KSS. It would be more likely for KSS to elect to go private than to merge with JCP.
    Jan 11, 2015. 03:22 PM | Likes Like |Link to Comment
  • Why J.C. Penney's Strong Comps Aren't Yet A Game Changer For The Stock [View article]
    While this article makes a lot of good points, in the last paragraph it raises the specter of bankruptcy again. The odds of a J C Penney bankruptcy have dropped every quarter since Ron Johnson walked out the door. It looks like Penney could go cash flow neutral or cash flow positive in 2015. If so, the odds of bankruptcy will once again drop dramatically. That should make both the bonds and the stock much more attractive to investors.
    Jan 8, 2015. 04:15 PM | 3 Likes Like |Link to Comment
  • Is Macy's Setting Shareholders Up For Disappointment This Winter? [View article]
    Macy is the best "omnichannel" retailer in the US today, and well ahead of the pack. The author complains about Macy investing in brick and mortar locations, but clearly investing in existing brick and mortar, like 34th Street, when it is working makes sense. Macy is not generally building new stores, and has been closing about 10 stores a year as it becomes more of an online player, so new store investment is pretty much non existent. The "new store" investment is all going to online. Macy is also the "go to" place for gift giving, and the consumer has been telling us for months that the one place that he/she expects to spend more this year is on "gifts for others." And, despite the author's comments regarding Black Friday, November was a very good month for retail. Macy will have a very strong 4Q. Oh, and one other rather unimportant note, the author should talk to a good accountant about how EPS calculations work in companies who buy back stock...the quarters do not necessarily add up to the year.
    Dec 15, 2014. 01:00 PM | 1 Like Like |Link to Comment
  • This J.C. Penney Turnaround Simply Isn't Working [View article]
    While I have been, and am currently, a JCP fan, this comment only applies to the holiday season for big box, omnichannel retailers (like JCP) not JCP in particular. November was a very good month. Black Friday was not down 11%, NRF's opinion notwithstanding, and December is off to a very good start. This will be the best fourth quarter for discretionary retail in a very long time. Amazing what being up against the worst weather in 50 years, a huge drop in gasoline prices, and more people working will do for retail.
    Dec 9, 2014. 05:27 PM | 2 Likes Like |Link to Comment
  • Update: Macy's Earnings Impress Some, But Not Us [View article]
    Since they are starting from the $7 range they do not have to get to my $14 number to be a buy. I believe that they will have a good Q4, and that the good performance will continue into 1H 2015. And, that only has to get them back to the 10 to 11 range where they were already trading for the stock to be attractive. There are very smart people who believe that JCP is trading at twice what it is worth, and there are other very smart people who think it is trading at half of what it is worth. That makes for a very interesting stock.
    Nov 18, 2014. 08:15 AM | 1 Like Like |Link to Comment
  • Update: Macy's Earnings Impress Some, But Not Us [View article]
    Gator makes some good points, but here is the other side. It is not true that Macy wanted to have fewer than 800 stores but was constrained by the real estate market. Macy completed the May merger in 2005 and promptly closed and sold 80 locations that they did not intend to operate. Those stores were sold at about $60 per square foot, and the transactions were completed before the commercial real estate crash in 2008. If Macy had wanted to close and sell more locations it could have. And, there was never a time when Macy had more clout with mall developers and operators. Selling store locations to the existing mall owners was certainly an option at that time.

    The comment that many smaller stores are in disadvantaged non mall locations is also questionable. I think I can count Macy non mall locations that could be described as disadvantaged on one hand.

    And, even the claim that the merger put the stores "too close" together is questionable. Since Macy closed and divested virtually all of the overlaps in the three years following the merger, and since many markets acquired, like St. Louis, Pittsburgh, Denver, and Chicago had no major Macy presence before the merger, there is very little "too close together" in the 2014 portfolio.

    And, what about the "there are quite a few shopping malls where only the anchors are open" claim? Well, of the approximately 1100 regional and super regional malls in the US there were 78 zombies at the end of 2014, meaning occupancy was below 50%. To my knowledge there were zero where anchors were open and the GLA was uninhabited. But, in any event, Macy's 800 stores are pretty much limited to the 800 top malls in the country, not the 300 malls at the bottom where the zombies and the about to be zombies exist. Sears and Penney, do inhabit those 300, but a Macy stuck there is rare.

    Diversity of the customer base is as mentioned by gator an issue, but the My Macy program is dealing with that better than anyone has ever dealt with it in the broad line department store space. While the strategy of gearing the store to the demographics of the neighborhood may cause occasional cognitive dissonance to a shopper who expects something different, over all it has resulted in better sales and happier shoppers, and fewer markdowns.

    Regarding Internet sales and returns, Macy and Nordstrom are arguably the best omnichannel retailers in the US having perfected selling to desk top, tablet and mobile devices, allowing Buy Online, Pick Up in Store (BOPIS), global inventory (so that no matter where it is in the system it can be used for online fulfillment), and, yes, return to store. But, contrary to what gator has said, Macy wants the customer to return Inet sales to the store, since they buy when they are returning. If they could get 100% of Inet returns to be in store, they would be thrilled.

    And, Macy's ability to continue to deliver 40% gross margins in the face of ever more competition tells me that the "diversity of income" has not caused much, if any, need for greater markdowns. What causes the need for greater markdowns is competition, and every retailer is experiencing that.

    Retailing, is, in fact, an ever tougher world in which to make a buck, but Macy has been out in front on technology, online, global inventory, improved customer service, and bottom line profitability. And, they are doing it in a retail space that has seen about 145 other department store names disappear since I started following the space. I think gator should cut Terry and the gang some slack. The returns since the merger have been stellar. The company has a fortress balance sheet and can buy back stock and pay a healthy dividend and still invest in technology to be a leader. Gator sees what I see and thinks the glass is half empty...I think it is half...maybe three quarters...full.
    Nov 16, 2014. 12:22 PM | 3 Likes Like |Link to Comment
  • Update: Macy's Earnings Impress Some, But Not Us [View article]
    Let's see, there are two million more people working year over year and the lowest level of unemployment claims in the US in 14 years, slightly (very slightly) positive wage growth, probably a better weather compare (last year was the worst selling weather for the holiday season in 50 years), a slightly longer selling season (one extra day), a good placement of the holiday (mid week, not a weekend), better inventory levels coming out of 3Q, no input price pressure (cotton falling like a stone and a stronger dollar holding down "real" wage increases in Asia), no real issues hiring sales help in the US, the best consumer confidence number in years, and...drum roll...$40 billion...no, $50 billion...no, $60 billion...wait, late breaking news, $61 billion as of 5 pm today in the consumer's pocket from falling gas prices in the retailers' Q4, and there is a close correlation between stock market appreciation and holiday sales. So, you do not want to own the company that owns holiday gift giving and is the best omnichannel retailer in the country? I think you are making a mistake.


    Nov 16, 2014. 03:15 AM | 2 Likes Like |Link to Comment
  • Wal-Mart Ends Its Streak For The 'Wrong' Reason [View article]
    I think that you nailed it...but positive comps still beat negative comps:)
    Nov 13, 2014. 05:17 PM | Likes Like |Link to Comment
  • Sears Gets Creative [View article]
    Aventura is, indeed, a great idea, but it still requires a very substantial investment to go from the old, dumb Sears box to the new, cool experiential space. Putting Primark in half a dozen Sears stores, and leasing half of the Sears store at King of Prussia Mall to Dick's and the other half to Primark is a great deal for Sears and for Dicks and for Primark. I like the creativity. Spinning off Lands' End was good for Lands' End and for Sears. But, almost all of the Sears locations and almost all of the Kmart locations cannot be "reconstituted." Eddie is a really smart guy, but if he really figures out how to make the dog's dish that is Sears/Kmart work across the portfolio...I will run naked down Wall Street...on a trading day...at high noon...
    Nov 13, 2014. 04:38 PM | 1 Like Like |Link to Comment
  • Sears Holdings: Assessing The Impact Of The Store Closures [View article]
    Damn, now that is really funny, no mater what your view of Eddie and Sears happens to be!
    Oct 28, 2014. 05:35 PM | Likes Like |Link to Comment
  • J.C. Penney: Valuation Has Settled Into A Reasonable Range [View article]
    I think describing a guy (Ellison) who spent half of his career at Target as having no experience with apparel is just wrong. The overlap in Target and Penney product is relatively high in apparel, soft home, pots and pans, jewelry and accessories, as well as seasonal goods like holiday trim a tree. His background is a good one for Penney.
    Oct 20, 2014. 07:35 AM | 3 Likes Like |Link to Comment
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