After lousy earnings sent JCPenney shares plunging on Wednesday, top hedge fund manager Whitney Tilson tells us, he hit the buy button.
“Our view about how much JCP will be worth 5 years from now hasn’t changed at all -- despite some pretty grim sales numbers,” says Tilson, who is founder of T2 Partners and a CNBC Contributor.
His firm pulled the trigger in the high 27 and low 28 range. However, Tilson’s optimism certainly does not seem like the prevailing view on Wall Street.
Investors ran for the exits after the latest JCPenney earnings results showed same-store sales dropped 18.9 percent in the first quarter, more than the 12.2 percent decline expected by analysts, according to Thomson Reuters I/B/E/S.
“This happened because JCP got into a cycle of running something like 800 promotions a year,” explains Tilson, “and they conditioned their customers to only shop when they were getting a huge discount.”
That sounds bearish – but dig down and Tilson says you’ll find a compelling thesis.
“Before CEO Ron Johnson came in, only 0.2% of what JCP sold was at the price marked on the merchandise. In other words, they taught their customers to never buy at the marked price.”