The struggling retailer J.C. Penney Company, Inc. (NYSE:JCP) remains in the limelight even after Ron Johnson's ouster, but almost never for good reasons. However, today the company (as well as Bill Ackman) received some good news. Legendary (and still alive) investor George Soros has filed a 13G showing a 7.9 percent stake in J.C. Penney Company, Inc. (NYSE:JCP). The fact that Soros filed a 13G and not a 13D indicates that this is a passive stake
Shares of the company are up over six percent in after hours trading on news of the purchase. According to Reuters data the stake would make George Soros the fourth largest shareholder of the retailer. With a stake of over 17 million shares and the stock trading at $16.40 a share, George Soros owns about $300 million of the equity.
Credit Suisse is out with a new report on the company (which was released before the Soros news) which we detail below:
Since last year, one of the most frequently asked questions among the retail investment fraternity has been "where did all of J.C. Penney's sales go?" The question intrigued investors and analysts alike. But Credit Suisse Group AG (NYSE:CS) has finally found the answer.
Credit Suisse Group AG (NYSE:CS) said in its latest research report that the lost sales didn't go to Kohl's Corporation (NYSE:KSS). which is the main competitor of J.C. Penney Company, Inc. (NYSE:JCP). Credit Suisse analyst Michael Exstein believes that overlap with Macy's, Inc. (NYSE:M) is also much lower than most people thought. Earlier in March, Ex-CEO Ron Johnson said that only about 40 percent of J.C. Penney customers overlapped with Macy's, and most of them were low income group customers of Macy's. Even Macy's stated that though its sales had a positive impact due to J.C. Penney's woes, it wasn't substantial.
Walmart Was The Dark Horse
The world's largest retailer has been focusing on its grocery business for decades. Michael Exstein said that the percentage of sales from grocery business witnessed an increase every year since its inception in April 1998, until 2012 which was the year of J.C. Penney Company, Inc. (NYSE:JCP). A large portion of growth in the grocery business would come at the expense of department store categories like home and apparel. But that trend changed in 2012, notes Credit Suisse Group AG (NYSE:CS).
Analysts found that for the first time since 1998, the grocery business of Wal-Mart Stores, Inc. (NYSE:WMT) didn't grow as a percentage of sales in 2012. It remained at 55 percent in 2011 and 2012. By contrast, Wal-Mart's apparel category same-store sales increased for the first time since 2005. And home category was the only U.S. business division of Walmart to grow as a percentage of sales in 2012.
The Credit Suisse Group AG (NYSE:CS) analysts found two implications. One, J.C. Penney Company, Inc. (NYSE:JCP) customers are more of Wal-Mart Stores, Inc. (NYSE:WMT) customers than Macy's Inc. (NYSE:M) customers, which the former J.C. Penney management failed to grasp. Walmart seems to have strengthened its foothold in the higher margin businesses. Analysts expect that the new J.C. Penney team will make an aggressive effort to recapture the lost market share. But if Walmart succeeds to hold onto its gains, it would help the retail giant going forward at the expense of J.C. Penney.
Additionally, analysts noted that Sears Domestic and off price retailers were among other beneficiaries of J.C. Penney Company, Inc. (NYSE:JCP)'s struggles. Sears Domestic posted six straight quarters of apparel same-store sales growth, but that may be partially due to the Kardashian Kollection.
J.C. Penney Company, Inc. (NYSE:JCP) shares were up 0.89 percent to $15.32 at 3:39 PM EDT.