J.C.Penney just reported 1Q13 sales and earnings. They were
previewed in part on May 7, 2013. Now we know the facts – sales were lousy,
they dropped 16.4% over the previous year’s horrible figures when sales dropped
20.1%. The company now has an annual revenue run rate of $12.5 billion, a drop
of 36% since January 2012. A net loss of $348 Million ($1.58 a share) was
reported in the first quarter, a cumulative loss of $1.3 Billion since Ron
Johnson took over. Mike Ullman, who returned to save the company, has an
urgent need to preserve cash. In the first quarter the company burned through
$970 million in cash pursuing completion of some of the projects already
underway such as the home store (to be opened June 6 in 505 stores) and home
boutique shops like Michael Graves, Bodum and Design by Conran. I believe the company was not far from
declaring bankruptcy without the recent $1.75 Billion senior loan facility and
the revolving credit line that was drawn down, There is about $531 Million left
on the asset backed loan. It is Mike Ullman who is convincing investors,
suppliers, and associates that his plan will bring the company back to a
financially strong position. The need for a strong marketing program is evident. Ullman’s
first strategic step to beef up marketing and promotions can be seen in recent
ads that have a stronger promotional flavor and include coupons. Promotional circulars available in some
cities, like New York, communicate an urgent message to shop. One thing I do not understand is why some
large markets like Boston and Washington do not have these circulars inserted
in their leading newspapers. I assume
that eventually they will.
