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After the Ackfire - Regrouping at JCP

September 18, 2013 | About:
Sally Jones

Sally Jones

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In the last few months, numerous billionaire investors have clearly divided on the fate of iconic department store J.C. Penney Co. Inc. (JCP). Joining six other billionaires selling out, Guru Bill Ackman sold out his embattled position of over 39 million shares. Meanwhile, three more gurus made new buys in the second quarter of 2013, and four gurus made call options. In August, two guru stakeholders upped their shares significantly, and in the first week of September, Kyle Bass made a splash buying 11,428,450 JCP shares.

Encouraged by his company’s back-to-school sales, Myron E. (Mike) Ullman III, chief executive officer of J.C. Penney, said last month, “Since I returned to J.C. Penney four months ago, we have moved quickly to stabilize our business - both financially and operationally - and we have made meaningful progress in important areas of the business. There are no quick fixes to correct the errors of the past. That said, we have identified the challenges, put solid plans in place to address them and have experienced and capable people in key roles to do so.”

J. C. Penney Company Inc. reported financial results for its fiscal second quarter ended August 3, 2013: Net sales of $2.66 billion compared to $3.02 billion in the fiscal second quarter of 2012. Comparable store sales declined 11.9% in the quarter. Comparable store sales for the quarter improved sequentially by 470 basis points when compared to the first quarter of fiscal 2013. Gross margin was 29.6% of sales, compared to 33.2% in the same period last year. During the quarter, the company enhanced its liquidity by entering into a $2.25 billion senior secured term loan facility. The company also paid $355 million to complete a cash tender offer and consent solicitation with respect to substantially all of its outstanding debentures due 2023. This resulted in reducing earnings per share by $0.52, according to a company press release.

Here’s a summary of the recent prolific trading by billionaire investors:

J.C. Penney Co. Inc. (JCP)

Down 53% over 12 months, J.C. Penney Co. Inc. has a market cap of $3.03 billion; its shares were traded at around $13.54 with a P/B ratio of 1.30.

Guru Action: As of August 27, 2013, Bill Ackman sold out his position after a long battle. In five quarters of losses, he averaged a loss of 53% on 39,075,771 shares bought at an average price of $28.90.

Here’s GuruFocus coverage on Ackman’s trade.

Selling out his JCP holding, Bill Ackman joins Tom Russo, Chase Coleman, Hotchkis & Wiley, Dodge & Cox, Whitney Tilson and Ruane Cunniff, all of whom sold out as of June 30, 2013.

As of June 30, 2013, Steven Cohen, George Soros, Whitney Tilson and Louis Moore Bacon made call options on their JCP holdings.

In the second quarter of 2013, new buyers included Chuck Royce, George Soros and Richard Perry.

In August, two gurus added to their positions:

With 9.1% of shares outstanding or 20,060830 current shares, Larry Robbins increased his position by 137.9%, as of August 22, 2013. He has averaged a loss of 37% on 9,554,297 shares bought at an average price of $21.76. Selling 1,122,418 shares at an average price of $16.83, he has averaged a loss of 18% over four quarters of holding.

New buyer in the second quarter, Richard Perry upped his stake by 58.33% as of August 30, 2013. He now holds 8.63% of shares outstanding or 19,000,000 shares.

Most recently, Kyle Bass made a new buy of JCP as of Sept. 3, 2013, buying 11,428,450 shares at around $12.72 per share. The current share price is $13.74. This buy impacts the Bass portfolio by 379.17%

Track historical share pricing, revenue and net income:

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Citing the value of customer loyalty, JCP’s CEO Mike Ullman said, “Moving forward, we're focusing our efforts on regaining customer loyalty by offering trusted brands, award winning service and affordability that families can depend on. We are encouraged by our early performance this Back to School season, which reflects customers' growing confidence in the brands and styles we offer. Our associates across the country are working tirelessly to serve our customers and I am proud of their efforts.”

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About the author:

Sally Jones
Sally Jones writes about Real Time Picks. She says, "I truly enjoy watching the Gurus in realtime and telling their story."

Rating: 2.0/5 (7 votes)

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