Sunday, June 3, 2012

Check out JC Penney

I'm the typical guy when it comes to shopping: I hate it. I only go to stores that I know and like, and then only when I need something. My favorite store is Nordstrom, but I only buy things that are on sale, since I can't bear to pay $100 for a shirt that must cost them less than $10. For decades, I have gone to JC Penney only every other year, when I needed new socks and underwear.

So a few months ago, before our recent trip to Argentina, I went to JC Penney for some socks and underwear, and I was amazed at what I saw.

About a year ago I remember reading that Ron Johnson, the guy who spearheaded Apple's hugely successful retail stores many years ago, had left Apple to become CEO of JC Penney. His goal: rethink JCP's entire retail strategy. The stock jumped on the news, but then settled back down. Last January, JC Penney announced their new strategy: low prices every day, plus new brands and better selection. This boosted the stock from $35 to to $43, but then it settled back down again. Three weeks ago, JCP plunged from $34 to $26 on news that the new strategy has not produced the desired results. The company reported a first-quarter loss and suspended dividends.


Tim Travis does a good job of summarizing the rationale for buying JCP at these levels. The Street, however, is very disappointed, with many arguing that a strategy of everyday low prices just won't work—too many people are addicted to sales. In any event, I hasten to add that just about all I know about the stock can be found in this post.

What really gets me excited is that I have visited a JC Penney store about five times in the past month or so, and every time I've bought things I wasn't even looking for. This is not the store I remember, not at all. The prices (all rounded to nearest dollar, which makes me feel like they aren't trying to fool me) are extremely reasonable and in many cases unbelievably cheap. The quality is excellent, and they have the latest fashions, with lots of name-brand merchandise.

If you haven't already, I strongly recommend you visit a JC Penney store and check things out for yourself. I can't believe that great stuff for low everyday prices won't eventually be a winning formula. And for those that like sales, they have a special every month on a certain collection of things. Today I bought Father's Day stuff (all on sale: two shirts and a pair of shorts) for myself, and was stunned when I saw the total: $49, including tax. My wife thought they were fantastic. I'll be wearing them to a BBQ tonight.

I am going to be looking closely at taking a position in JCP.

14 comments:

Dr William J McKibbin said...

If you enjoy shopping at J C Penney, you will like Sam's Club as well...

William said...
This comment has been removed by the author.
William said...

My Mom worked at a J C Penny's store in the late 1950s for a few years to help with our college tuition. She said then that Penny's made the best T-shirts and I have bought mine there ever since. In fact, just two months ago I bought two packages - if you bought two, they were 20% off.

I did notice that the store was very bright and they had many colorful clothing displays. Very attractive.

Gloeschi said...

I want to buy shares of the US Postal Service. Those stamps are pretty cheap, and they work.

Buddy R Pacifico said...

"My favorite store is Nordstrom, but I only buy things that are on sale, since I can't bear to pay $100 for a shirt that must cost them less than $10."

Nope. Nordstrom likely paid $50-$55 bucks for acquiring a non-sale category shirt.

Yep. I agree about buying only on sale and will take another look at Penney's merchandise. The interior of the stores is vastly improved.

Squire said...

I get the same low prices and high quality at Sears and Kohl's.

John said...

JCP is a potential 10 bagger in 5 or 6 years in my opinion. I have begun building a position since the share price collapse last month. Do your homework before investing and be willing to live with high volatility and no income indefinately but the payoff could be awesome. Few will experience it. Very few.

Bill said...

Good to see you again John. Looks like we're in for another miserable summer in the market. I used to really look forward to the summer!

William said...

Echo that: It is good to have you back, John!

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minnesota nice said...

Sorry for the delayed post. I have been in JCP twice in the past 6 months. Both times with my wife. Both times she went on about how she doesn't like the pricing and that women won't like it and it won't work...
This has made her even more devoted to Kohl's. They have discounts, rewards, sales, clearance...
I know nothing about the stock, but I'm not buying.

Scott Grannis said...

minnesota: Thanks for the feedback.

Bob said...

Scott, funny thing I just went into JCP the other day and outfitted myself for the entire summer for about $250. Shorts, shirts, long pants, sandals.

Hadn't been in one for a while, but the store was colorful with plenty of choices. Talked to two sales staff who were both very helpful, one pointing to a line of socks that were being discontinued and were half price, 6 pair for $5.

Like you, I'm not much of a shopper, but do not like to pay high prices for clothing, so was happy with my experience.

I will look into extablising a positin in JCP.

Thanks

Rob said...

Scott, ok so JCP finally fired the Apple guy - his Apple-style no-discounting approach didnt work (in the desired timeframe at least) .. they brought back the previous CEO which looks pretty lame ... then they had a secondary offering at deeply discounted price (sub-$10) .. then the CEO himself bought $1m of stock for about $9 ... lots of hedge funds seem to like JCP (although so far they have got it badly wrong) .. the new CEO has reintroduced lots of discounting and "special offers" ... what's your take Scott, could it be worth a punt at just over $10 ? Thanks.