Since Ron Johnson joined JCPenney, the stock has received a free pass.
JCP shares are actually up 11 percent despite continuing disappointments. But after all, if anyone can revive a tired retailer, the man who created the Apple retail experience should be the one.
But make no mistake, Ron Johnson and the dream team he has assembled have their work cut out for them.
While the likes of Macy’s are gaining share and consistently beating expectations, JCP November comps were down 2 percent.
JCP did not compete in the midnight Turkey Day opening game, which was an error in strategy.
December comps were not any more encouraging and the company slashed EPS estimates for the fourth-quarter by close to 40 percent versus expectations.
As we approach the much anticipated two-day JCP analyst meeting, which starts Wednesday morning, there is no limit to the speculation surrounding what Johnson will tell us. Will he roll out glass stores? Will Genius bars appear?
In other words, what is the magic bullet?
While many investors’ minds are working overtime on this subject, realistic expectations include a few basics. First, JCP must somehow inspire the younger consumer to come into the store.
That may include much-needed new brands, which may come in the form of a store-within-a-store format. JCP has already added MNG by Mango and Sephora in 500 and 300 stores, respectively. And recently JCP bought a stake in Martha Stewartand announced a store-within-store concept for that brand.
I certainly hope what the new team has to tell us is a little more exciting than that. Certainly, I was a bit more excited about Target’s recent confirmation they will test Apple store-within-a-store formats.
Next we turn to the pricing part of the equation.
Will JCP go to an "everday low price" model? Wait, isn’t that what Wal-Mart is doing? This may raise the question if all the big guys go in the same direction who is really differentiated? Think free shipping around holiday time. If everyone is doing it, how does it help?
And don’t forget Target. The second largest discount chain recently reached out to vendors asking for help on the exclusivity front in order to fend off consumers using their stores as a showroom. And where exclusive products are not possible, Target has asked for help on the pricing front.
While Target put up disappointingDecember comps, the company has certainly been at the forefront of differentiated product (which was in large part due to Johnson’s effort while he was at Target), most recently a Missoni line.
Johnson has clearly tried to lower the bar by recently clearing the EPS guidance deck. However, investors still seem to think a magic formula is about to be revealed.
We have seen turnaround stories before. Some have high hopes but never materialize (RadioShack ) and others take patience. The question is with the stock trading at 21-times January 2013 earnings estimates, how long will investors be willing to wait?
Stacey Widlitz is the President of SW Retail Advisors Inc. She has worked at UBS, SG Cowen, Fulcrum Partners and in 2005 was one of three analysts to launch the Research Department at Pali Capital, where she covered Retail and Home Video for five years.
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