Jim Cramer Contrarian On Walgreen, JCPenney
“There’s a lot of ways to win in business,” he said, listing a few tried-and-true methods of beating the competition. “And then again, sometimes you can win by doing nothing, doing nothing but going against flailing and faltering competitors who seem to be flummoxed and floundering in unfathomable ways. Or to put it another way, you can be lucky enough to compete against JC Penney and Walgreen.”
This week, JCPenney announced that key executive Michael Francis would be leaving the company. Francis, who came from Target, was supposed to help new CEO Ron Johnson reinvent the retailer, shifting away from its coupon strategy it had employed for years.
Johnson, who saw same-store sales plummet 18 percent in its most recent quarter, will now take over merchandising along with operations. That could spell trouble.
“Frankly, JCPenney, while early on under the reins of Johnson, seems to have totally lost its way,” Cramer said.
The company, based in Plano, Texas, appears to be handing over billions of dollars in sales to such competitors as Target, Macy’s and Wal-Mart.
“Penney’s the gift that keeps on giving — not just to the short-sellers but to this troika of very lucky competitors,” Cramer said.
Walgreen Co. is another company whose stock Cramer said might be good to bet against.
“Ever since Walgreen’s declared war on Express Scripts, formerly its pharmacy benefit manager, it seems to be all downhill for this gigantic drug store chain,” he said. “Customers have been fleeing to competitor CVS, as demonstrated by the 9.9 percent decline in comparable pharmacy sales announced today.”
But rather than try to reverse the trend, Walgreen instead announced acquisition of a 45 percent stake in Alliance Boots, a giant drug store chain in the United Kingdom, for $6.7 billion.
“What the heck? Is spending a fortune buying a portion of a global chain of drug stores the way to reverse the defections to CVS? I don’t think so.”
Cramer admitted that there was a chance the companies could make their gambits pay off.
“But in the meantime, I say they are terrific reasons to buy their competitors as their failures and footfalls play right into the hands of the stores right next door to their own operations,” he said.
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