J.C. Penney Company, Inc. (NYSE:JCP) plans to devote more floor space to towels, cooking utensils and luggage to stem its falling fortunes.
Yesterday, the retailer released its earnings report for the three months ended June, revealing it lost $2.66 per share. However, silver linings were seen in the company’s better than expected gross margin. The retailer was expected to lose $1.14 in the quarter on revenue of $2.8 billion.
New CEO reorients strategy
J.C. Penney Company, Inc. (NYSE:JCP)’s former CEO Ron Johnson was betting big on initiatives such as a more upscale home department selling designer goods such as $60 toasters and a $1,695 chair from Happy Chic. These initiatives, however, did not resonate with the retailer’s middle market customers, as the retailer’s sales at stores open at least 12 months fell 12 percent during the second quarter.
To stem its falling fortunes, J.C. Penney Company, Inc. (NYSE:JCP)’s current CEO Mike Ullman is gradually eliminating any trace of his predecessor by planning to sell low-priced items such as towels in the wide aisles in the home area. Matt Townsend of Bloomberg feels the new CEO is saddled with vestiges of his predecessor’s strategy, which involved turning the stores into mini-malls of branded boutiques that were too far along to abandon.
Hedge fund managers’ bet on J.C. Penney
Yesterday, a Bloomberg piece revealed that hedge fund manager Kyle Bass has made a bet on the survival of the retailer by acquiring J.C. Penney Company, Inc. (NYSE:JCP)’s debt. Other hedge fund managers such as Bill Ackman and George Soros hold 17.7 percent and 9 percent of the company’s stock respectively.
However, recently Bill Ackman, head of J.C. Penney’s largest shareholder Pershing Square, had resigned from the company’s board, putting an end to a public boardroom brawl.
After posting its worse-than-expected second quarter results, J.C. Penney Company, Inc. (NYSE:JCP) revealed the progress it was making on its restructuring efforts. Interim CEO Myron Ullman said in a statement that they are moving quickly to stabilize the business and have made meaningful progress in important area. The retailer also termed the early weeks of the Back to School shopping season ‘encouraging’.
Thus, the interim CEO has to battle the expectations of hedge fund managers, preserve much-needed cash, and win back shoppers.