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The mere survivability.
Of retailer JC Penney as a publicly traded company has been hotly contested lately in the stock has been tanking.
With the launch of a new designer in stores Friday we're wondering -- penny wise on the stock the buyers.
Or the sellers what's already throw all the -- corridor we have also -- India's Morningstar equity analyst.
And the JC -- corner we have Rick Snyder maxim group senior consumer retail analyst welcome to you both.
I will begin with Paul -- you get to sell me on why you think this is a good company when they keep making misstep after misstep.
Well I think the most important thing to my thesis is that -- shop in store concepts that they're putting in.
Are actually gonna make a difference.
Now the tough part is that sales decline and it.
-- worse than expected sales declines might have damaged the company beyond repair already.
But I'm still seeing very positive signs and the company's -- reporting positive signs from the stores or the shops that they've installed in the stores.
Rick -- -- do what they already had a had a little bit of a fight with the Martha Stewart issue that was a store in store can Monday and used those little mini sort of inside I dare call them kiosks but.
About little stores within stores to save the entire problematic company.
I think it's too little too late -- They have had tremendous traffic drop offs and they have no conversion.
And most of poorly they have no cash flow.
OK but but they've got real estate do they not -- mean isn't that worthy of something another with a piece of Barron's saying ask not quite enough to get it going but is that a possibility.
I not for the stockholders in my opinion I believe that.
The real estate is worth an average of about fifty dollars a square foot.
Which at 43 million square feet would not be enough to cover the bondholders so there's nothing left over for the equity holders -- -- point -- Paula.
Look let's talk about -- Johnson can he survive this.
I think he is on a much shorter leash and I think part of the problem is the fourth quarter.
On the company had sort of forecast that they were starting that test coupons to drive the traffic.
And then the traffic still was bad and that comp was even worse so.
I think he's on a short leash I think he's got to prove that he can move the needle on the comp store sales.
But I guess the other thing I'd point out is that.
The cash flow burn is actually not as bad as people expect a lot of it's due to their cap -- which they have some flexibility in spending.
And then they've also got a good a line of credit.
So the real issue here is the vendors start cut them off.
And right now the vendors are supporting the program actually contributing to the cap back Rick how long does that last stuff.
I think they're gonna have to tap into their revolver this year and if sales don't pick up they could B at the end of that -- very quickly.
Okay happy you know faith rich and Ron Johnson and he was the wonder kin from apple stores and we know how successful they work.
Yes but here's what I would say about that it is a lot different selling eyes -- that it is selling an iPod.
I -- -- you know that's that's a big label that's one -- -- big labels it's one of their shops and shops and it's a commodity ties.
Type a product as opposed to the iPod which certain which creates its own demand.
-- -- have been -- -- and bearish on the stock since it was forty dollars I have to do is look at it now on realize you were right on the money there.
I would think that.
She would speak to you have you picked up the phone have you talked to Ron Johnson what does he say I've tried to cut talk to the company's several times and if they don't return my calls.
At all no cultivate talk to you.
Well I think I haven't spoken to Johnson directly.
-- last week but I have spoken with the company.
And I I think you mix characterize me in the -- in your introduction as a leading analysts are now -- lonely analyst.
-- -- -- -- -- -- -- -- -- -- -- -- -- -- Tend to be fair you know the company has said some things recently which I've found a little disconcerting.
I thought John through the real world -- -- defensive on the last analyst call which is a big difference.
So I think he is on a short -- I think that the first quarter also don't forget there are constructing.
New shops and 30% airspace that's 30% of the space that's out of selling stuff I think they've got another bad quarter ahead of them.
Arm I agree that they're gonna -- the revolver this summer that's usually the peak draw the question is can investors see.
The you know the turnaround happening in some improvement.
And also point out it's it's one of the top shorts on Wall Street night right now and that -- -- -- tighten hedge fund battles wealth so.
Paul what would it take for you to switch -- bullish outlook could change your rating here you're the lone wolf there when it comes from the loan bit Bolick aspect.
Are you close to changing your rating.
Yeah I mean obviously -- -- a lot of vile.
Of lot of what I'm saying is that dependent on the assumption that the shops are still getting great sales -- where airports so.
We've got these new openings like show fresh if that can't do 300 dollars a square foot.
Or the new camera system is doing 85 like the old home.
Well that's just not gonna work Rick tell us -- question what would it take for you to change your rating to a more positive one right now.
This is all this is retail so it's all about sales and I think that -- -- getting traffic conversion.
Then I would have no choice but I don't see it down the road and the Joseph fresh comes in this Friday which is march 15 -- I would say.
That if that doesn't work JC Penney could have the worst ides of march since Julius Caesar greeted -- hello on the -- the senate.
The various go -- is.
Bearish -- I want to thank both Rick and Paul very much we so appreciate how honest you've been on the stock we are watching it closely watch a Friday.
Joseph fresh I've seen honestly I've -- some of that in the editorial pages of vogue they're trying hard they're pushing their stuff.
Maybe somehow this turns around pulse -- and morning start Rick Snyder maxim group great to see both of you thank you --
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