JCP’s 3rd quarter results: The beat-down goes on

Since JCP released its 3rd quarter earnings last Friday, there has been plenty of commentary about the worse-than-expected sales trend, gross margin performance and operating losses. There isn’t much that I can add except to point out that JCP will give back between $3 and $4 billion in sales in 2012…and it didn’t need to be that way.

JCP could have pursued a less promotional strategy that still involved some sale events (like Nordstrom, for example, or maybe more frequent), and the losses in sales (let’s assume in the 10% range) would be a lot easier to understand and to swallow. The management team would buy itself more time to execute the rest of the strategy (new shops, new brands, etc.) without bleeding cash.

Instead, Ron Johnson and Bill Ackman (his lead investor) are trying to find new ways to spin the results. Now they are talking about the “old JCP” and the “new JCP,” holding out the promise that the revamped company can produce twice the sales per square foot vs. the current model. Here’s the problem with that theory: If you assume sales today of $135/ft. (based on 2012 volume of $13 billion, I guess) and future sales of $275/ft. (those are the numbers being thrown around this week), you also need to assume that JCP will be a $25 billion company when this is all over. (Or it will have to shed a huge amount of square footage.) Does anybody buy that?


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