A lot is happening at J. C. Penney Company Inc. (JCP). After the Ackman drama, now Steven Roth’s Vornado Realty Trust (VNO), one of the major stakeholders of J. C. Penney, has decided to sell its stake in the beleaguered retail chain. Following this, Steven Roth resigned from J. C. Penney's board as disclosed in the company's recent regulatory filing.
Though Vornado has not yet decided the price of the share offering, it is expected to incur a huge loss for the company. Vornado is the sixth-largest shareholder in J. C. Penney with approximately 13.4 million shares or 6.1% stake.
This is similar to the move of Bill Ackman, another large shareholder of J. C. Penney, who in late Aug 2013 decided to sell his entire stake. Ackman publicly criticized the company’s board, its way of functioning and condemned its lethargy in finding a new CEO. Ackman also demanded the removal of the interim CEO Mike Ullman and Chairman Tom Engibous.
Ackman’s Pershing Square Capital Management LP and Vornado had first invested in the beleaguered retail chain company in 2010. Perishing Square and Vornado took an initial stake of 16.5% and 9.9%, respectively. Both the investors later joined J. C. Penney’s board in Feb 2011. At the time when Ackman announced his stake sale decision, Pershing Square had nearly 18% holdings in J. C. Penney. Notably, Vornado divested about 40% of its stake in March this year.
However, there are other hedge funds which are purchasing large stakes in J. C. Penney. According to a regulatory filing in early September, Kyle Bass’ Hayman Capital acquired 11.4 million shares or 5.2% stake in J. C. Penney. Alongside, Larry Robbins’ Glenview Capital Management disclosed that it now owns 20.1 million shares or 9.1% stake in the company.
Shares of J. C. Penney have fallen approximately 34% year to date, reflecting decreasing revenues and higher losses. Moreover, the company has not shown any signs of recovery in the recent past. This is evident from its 7th consecutive quarter of sluggish results on Aug 20.
The company’s restructuring initiatives have been failing and J. C. Penney is constantly lagging its peers, Target Corporation (TGT) and Macy’s Inc. (M).
However, the company has taken several strategic initiatives to drive traffic and conversion. The company brought back promotions, which we believe could be a successful sales driver.
Moreover, the company’s continuous focus on improving its assortments, increasing marketing and selling hours and the revival of the JCP Rewards program will likely augment store sales productivity, thereby driving profitability in the long run.
Currently, J. C. Penney carries a Zacks Rank #3 (Hold).
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