The reason why the stock spiked after the news hit that Ron Johnson had been ousted as CEO is because the immediate perception was that Johnson’s policies were so detrimental to JCP, anyone but him would be an upgrade. However, as the news was digested, the shares slid and are now down 7%.
Why?
Firstly, it means that the largest holder of the stock, Bill Ackman, should divest from the company, since his entire thesis was “revolution by Johnson”, turning JCP into a frappacino, ipad loving, place of chic high end retail–a gathering corridor for gay males to converse about fashion and technology. The only problem with that idea is the fact that JCP has been the home base for old ladies with coupons in their purses for the past 50 years.
Johnson’s retail strategy was a good one, just not for JCP.
Secondly, now that Johnson is out, does that mean Joe Fresh is out? JCP has already converted more than 10% of its stores and has spent billions on revamping their strategy. Surely the new CEO will have to revert to the JCP of old, which might lead to a massive write down.
Thirdly, their debt covenants will be called into question soon. The company doesn’t have enough cash to survive until 2014. Therefore, they need to raise capital. A new CEO isn’t going to travel the ruinous path of Johnson. Therefore, he is likely to raise capital immediately.
This needed to be done now, so that the company could be on firm footing for the holiday shopping season. There was a chance that suppliers would withhold merchandise–fearing a JCP bankruptcy.
My best guess, this is going to be a make or break X-mas for JCP. However, the stock is going to be a buy AFTER they raise capital.
Fly 1 – Ackman 1
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Here’s what happens to JCP and CCL, for that matter, http://ibankcoin.com/rhino/2013/04/08/a-monday-look-into-the-crystal-ball/
“a gathering corridor for gay males to converse about fashion and technology”
For us simple types this means that Bill did try to inculcate his SanFransicko values on straight female coupon clippers from Lexington Kentucky…..
Joe Fresh started in Canada at Loblaws, a grocery store cum super-store in some locations but more or less fighting for survival under a new business plan which included the Joe Fresh. Probably 8 years ago now. Avoid.
If Joe Fresh is done, the 2 gay people in America who were going to buy that clothing will riot in the streets!
“turning JCP into a frappacino, ipad loving, place of chic high end retail–a gathering corridor for gay males to converse about fashion and technology”
Does that mean fudge-packing is on the way out?
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