Of course, retail turnarounds are not impossible.
On Mad Money, we have highlighted Pier One (PIR), Ascena (ASNA), Chicos (CHS), and Gap (GPS). However, when a brand is diminished, it is tough to recover. Certainly there are the great retailers of our time—Costco (COST) founder Jim Sinegal, Mickey Drexler of the now-private J.Crew and previously Gap, Howard Schultz of Starbucks (SBUX), Frank Blake of Home Depot (HD), or Manny Chirico of Phillips Van Heusen (PVH)—have some clues on how to do this the right way. But, ultimately JC Penney seems to be—in my view and the view of many—a textbook case of how to do it… well, wrong.
So what do you do with the stock here? Well, it's on sale just like everything else in JC Penney's stores. But as we've seen, a sale isn't always intriguing. The ability for this stock to turnaround is questionable. Particularly with the "back to the future" strategy bringing back former CEO Mike Ullman. Question marks abound, as we have become used to with this name. Not to mention continued worries over the cash flow and debt levels.
Hey, at least Alcoa (AA) had positive comments about the market last night—especially end-markets like aerospace (we haven't seen Boeing go down despite Dreamliner issues!), autos, and construction… And there was even positive commentary about China (with positive economic data overnight to boot), where many have been worried about the slowdown in the region.
Of course, to hear these tidbits, that would mean you would have had to analyze the conference call while watching the Louisville vs Michigan game last night. #nerd. For Alcoa, despite improving trends, the stock remains in Rodney Dangerfield territory, not seeing any love, as Cramer noted this morning on Squawk on the Street. Perhaps we need to see the company shift to more specialty and away from commodity, a la what PPG Industries (PPG) did in the chemicals space, something Chuck Bunch has highlighted in his Mad Money appearances. The materials, the laggards of the first quarter of 2013, are showing some traction at last. But, ultimately, Alcoa is a lot less exciting than JC Penney and Herbalife.
The bottom line: Retail turnarounds are difficult. The enthusiasm the analysts, and Ackman, held at the beginning of Johnson's tenure was misplaced. And even now, with the stock right here, I wouldn't be a buyer particularly as there are better spots in retail including the off-price category like TJX (TJX) or best of breed department stores Macys (M) and Nordstrom (JWN). It certainly isn't an auspicious start for the next stage of JCP with the stock down about 10 percent today. Beware of enthusiasm too early on when it comes to turnarounds. And even down here, I wouldn't buy JCP.