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The War Over J.C. Penney

Tickers in this article: HLF JCP M
NEW YORK (TheStreet) -- When the late, great James Cash Penney founded a store under his own name in 1902, in Kemmerer, Wyoming, he doubtless never imagined that over 110 years later people all over Wall Street would be fighting over his legacy.

Penney himself was broken by the 1929 stock market crash, according to his Wikipedia biography, but he remained active after losing control of the company, reportedly even teaching a young trainee named Sam Walton on how to wrap packages with a minimum amount of ribbon in Des Moines, Iowa, in 1946.

Instead of pushing that image of frugality, Ron Johnson, the man chosen for the CEO's chair by hedge fund manager Bill Ackman at the end of 2011, tried to re-make it as a high-end, high tech "experience." He wanted to end sales, to turn the stores into a series of branded shops, and to have cashiers walk around the stores carrying iPads for instant check-out.

He broke the company instead. Sales fell by nearly one-third, year over year, and $1 in every 10 went to losses.

Today, J.C. Penney is a classic battleground stock. Reports that CIT had stopped funding product shipments collapsed the shares, which fell from $16 to $14.60 in the last hour of trading on July 31. Those reports were subsequently denied, and Experian Marketing Services put out a report that Penney was doing great in back-to-school sales, at least online. The shares were expected to open at $15.50.

That Experian story may have been something of a head fake. It was talking only about online sales, not in-store sales. But you have to also wonder about the origins of the CIT report, which seemed aimed at tanking the stock. To an extent, this is also about Ackman of Pershing Square Capital Management, who is fighting a rear-guard action on behalf of his Herbalife short. Crush Penney and he may surrender on Herbalife, the thinking goes.

Somewhat lost amid all this is Mike Ullman, the former JCPenney CEO who was rehired in April to try and clean up the mess Johnson left behind. Ullman quickly brought back the old Penney mainstays, like sales and coupons, and went right to work on the financing problem.