Despite the fact that J.C. Penney’s stock is having its worst performance in over 24 years as shares have plummeted over 18%, Whitney Tilson of T2 Partners announced that he is still long on the company’s stock and buying more amid the share price drops.
“Our view of how much JCP is worth five years from now doesn’t change at all despite some pretty grim sales numbers from last quarter,” he said on an interview with CNBC.
J.C. Penney’s stock started tanking after the retailer missed earnings estimates and announced they would be cutting their dividend yesterday.
Tilson said various factors—from the company’s improved cost cutting to the influence of new CEO, former Apple retail guru Ron Johnson—influenced his decision. Tilson said he had bought JCP in the high $27 to low $28 this morning.
J.C. Penney had conditioned their customers into a cycle of only buying at the store when there were sales, and Johnson has worked on weening customers off that expectation last quarter, which may have pushed sale numbers down more than expected last quarter, Tilson pointed out.
It “causes shock among customers…. they’ve been conditioned, literally for decades, to only buy when they had a 60% off coupon,” Tilson said.
Before Johnson joined J.C. Penney, only 0.2% of the company’s sales were made at the merchandise’s marked price, Tilson noted. In the last quarter, Johnson’s influence helped sell 67% of merchandise at marked price.
Tilson also noted that only 21% of people that walk into a JCP store buy something—so company already have the shopper base, they simply need to improve the merchandise.
Tilson said he would give the company at least 2 to 4 more quarters to right itself, so we’ll have a bit to wait to see if his long position actually pay off.
Here’s the video of the discussion: