Cramer: J.C. Penney Is an Unmitigated Disaster
Johnson encouraged people to think that the turn would be pretty smooth and he came out with guns blazing. Now the guns are blazing all right, but they're directed at him.
You know what I didn't like? Let me count the ways. We now know the initial boasting about the turn was pure hubris. Johnson was allowed to sell 777,348 shares of his grant from the board for $41 three days after he hyped it to the moon. Sure, he did it to pay for taxes, but you can pay for taxes a lot of different ways and I sure wish it hadn't been this way. He almost cut his holdings in half right at the high. Nice call!
He gave himself a great price.
The most nauseating thing about this conference call? Evidence of Johnson's hubris continued with the lack of any real humility about the dividend elimination, which is something older investors most definitely counted on. There was more touting of the changes he's putting through -- none of which look like they are working. He also said, "This is not a throwaway year. We expect to earn money this year -- good money."
Where did he get that from? Or how about that he says that the turn is 29% complete? Huh? That's a pretty amazing and precise prediction given how wrong he's already been.
To me he is both alienating the old and not bringing in the new. At the time he came in, I visited a JCPenney and was appalled at the merchandise selection. Appalled.
That was obvious to everyone. Everyone I guess except Johnson, who is now only discovering that old inventory is not his friend. That is so embarrassing.
This company's in big trouble. The brand changes aren't being executed in a way that I think will work. An 18.9% decline in same-store sales can't be turned around any time soon. Sears(SHLD) , which we all know hasn't been able to turn around, never had these kinds of bad numbers, and Sears has a much better balance sheet.
If Johnson simply had said nothing when he came in, if he hadn't slagged the competition, if he had kept expectations low, If he talked about how his everyday low price strategy would be rolled out over time to slowly wean the company's customers off couponing over time -- not cold turkey -- then maybe I would feel better.
But to me, the strategy has only worked for one person: Johnson, because he got that great sale price.