The Joplin Globe, Joplin, MO

Business

August 27, 2013

Bill Ackman bails out of J.C. Penney

NEW YORK — J.C. Penney’s largest investor and former board member is bailing out.

William Ackman of Pershing Square Capital Management is selling his nearly 18 percent stake, or 39.1 million shares, in the struggling retailer, according to regulatory documents filed late Monday.

The move comes two weeks after Ackman resigned from J.C. Penney’s board as part of a deal to resolve an unusually public battle between the activist investor and the struggling department store operator.

The news sent Penney shares down nearly 3 percent to $13 per share in after hours-trading after closing the regular session down 15 cents to $13.35.  Penney’s shares have lost nearly 70 percent of their value since early February 2012 when investor enthusiasm over former CEO Ron Johnson’s retail strategy pushed the stock to around $43. That includes a 36 percent drop in value so far this year.

Some analysts say they were surprised by Ackman’s plan to sell his shares so quickly.

“I didn’t expect it to be so fast, but I can understand that he wants to put it behind him,” said New York-based retail consultant Walter Loeb.

Belus Capital Advisors CEO Brian Sozzi agreed noting, “(Ackman) wants to cut bait and move on to something else.”

Citigroup, the sole underwriter of the shares, will be shopping the stock around to prospective buyers. A price range wasn’t revealed in the prospectus.

Ackman’s sell-off comes as the beleaguered chain is trying to recover from a botched transformation plan spearheaded by its former CEO that led to disastrous financial results. The board ousted Johnson in April after only 17 months on the job and rehired Mike Ullman, who had been CEO of the retailer from 2004 to late 2011.

Ackman resigned from the board on Aug. 13, after he went public with statements saying he’d lost confidence in Penney’s board and that Chairman Thomas Engibous should be replaced. Ackman and the retailer’s board also were bickering over how quickly the company should replace Ullman, who is expected to be an interim CEO.

Ackman initially purchased a stake in J.C. Penney in 2010. He joined Penney’s board in February 2011 and had pushed the board to hire Johnson, a mastermind of Apple Inc.’s successful stores. Under Johnson’s leadership, Penney got rid of most sales in favor of everyday low prices. He also brought in hip new brands and planned to remake the store as an indoor mini mall of sorts with 100 different in-store shops in an effort to woo trendier, more affluent shoppers. But those efforts alienated Penney’s loyal customers.

Penney ended up recording nearly $1 billion in losses and a 25 percent drop in revenue in the fiscal year that ended Feb. 2, the first year of the transformation plan.  Since returning to Penney’s helm, Ullman is bringing back basic merchandise like loose-fitting khakis and restoring frequent promotions. But sales declines and losses continued into the first and second quarters as Johnson’s legacy continued to cast a shadow on the results.

In the three-month period that ended Aug. 3, Penney lost $586 million, or $2.66 per share. That compares with a loss of $147 million, or 67 cents per share, a year earlier. Revenue was $2.66 billion, down 12 percent from $3.02 billion. Analysts were expecting a $1.07-per-share loss on revenue of $2.77 billion.

Penney offered some encouraging news in the second-quarter report: revenue improved from month-to-month, and the decline in Penney’s online business slowed significantly. The chain also said it saw a good start to the back-to-school shopping season. But Loeb and other analysts believe that Penney’s business won’t show signs of stabilization until the fourth quarter.

In a letter to investors last week, Ackman said that his investment in Penney was a “failure” and that retail “has not been our strong suit.”

Ackman’s Pershing Square Capital Management invests in and bets against a wide range of businesses, including McDonald’s Corp., insurance company MBIA Inc. and Canadian Pacific Railway Ltd. But Ackman has been particularly vocal about his dealings with Penney lately as the department store struggles to turn around its business. In the letter to investors last week, Ackman said it was “difficult to determine” how long a sales recovery might take.  However, he did not hint what he planned to do with Pershing’s stake in the retailer.

Last Thursday, Penney adopted a plan to prevent a takeover attempt though it said there is no current attempt to take over the company. However, the so-called “poison pill” can be put into effect if an individual or an entity acquires 10 percent or more of the company’s outstanding stock.  Belus analyst Sozzi noted that Penney appeared to be getting ready to prevent any possibility of a big investor buying a big block of shares.

Penney and Ackman have set terms to allow him to unload his stake in the company in an orderly manner.  Pershing Square Capital can make up to four requests to the company to register the sale of his shares. Each request must be for at least 5 million shares and the deal terminates when he owns less than 5 percent.

Penney will not receive any proceeds from the sale of the shares.

 

1
Text Only
Business
  • Business US stocks edge lower after a six-day rise

    Stocks edged mostly lower Wednesday, breaking a six-day winning streak, as investors were disappointed by the latest round of earnings from U.S. companies.

    April 23, 2014 1 Photo

  • Sales of new US homes plunge 14.5 percent in March

    The number of Americans buying new homes plummeted in March to the slowest pace in eight months, a sign that real estate’s spring buying season is off to a weak start.

    April 23, 2014

  • 3M plant expansion to create 22 jobs

    An $18.7 million expansion at the 3M Co. manufacturing plant in Nevada will create 22 new jobs, a company official said Wednesday. “We started 43 years ago as a small manufacturer,” said Todd Cantrell, plant manager, in a meeting with employees. “We are now the largest 3M plant in the state of Missouri and one of the largest of all 3M plants.”

    April 23, 2014

  • First lady announces one-stop job site for vets

    First lady Michelle Obama has announced a new online effort to link soldiers leaving the military with jobs that match their skill sets.

    April 23, 2014

  • Advocates vow to revive Navajo junk-food tax

    Facing a high prevalence of diabetes, many American Indian tribes are returning to their roots with community and home gardens, cooking classes that incorporate traditional foods, and running programs to encourage healthy lifestyles.

    April 23, 2014

  • Feds seek $211K in fines from Minn. company

    Federal safety regulators are proposing $211,000 in fines for a Minnesota agriculture company that authorities say repeatedly failed to make sure workers weren’t exposed grain dust hazards in Montana.

    April 23, 2014

  • Business US stocks edge lower after a six-day rally

    The stock market slipped Wednesday after rallying for six straight days as investors worked through another round of quarterly earnings reports from U.S. companies.

    April 23, 2014 1 Photo

  • GM, lawyers fight over bankruptcy protections

    General Motors Co. and a battalion of trial lawyers are preparing for an epic court fight over whether GM is liable for the sins of its corporate past.

    April 22, 2014

  • Comcast 1Q earns surge on upbeat NBC results

    Comcast Corp. said Tuesday that its first-quarter net income rose by 30 percent as ad revenue surged at broadcast network NBC, helped by the Winter Olympics in Sochi and Jimmy Fallon’s elevation as host of “The Tonight Show.”

    April 22, 2014

  • Valeant, Ackman make $45.6B Allergan bid

    Valeant Pharmaceuticals and activist investor Bill Ackman have unveiled details of their offer to buy Botox maker Allergan, proposing a cash-and-stock deal that could be worth about $45.6 billion.

    April 22, 2014

Poll

A Missouri Senate committee has adopted a state budget provision that would prevent public colleges and universities from offering in-state tuition rates to students living in the country illegally. Do you agree with this?

Yes.
No.
     View Results
Facebook
Twitter Updates
Follow us on twitter
NDN Video
SKorea Ferry Toll Hits 156, Search Gets Tougher Video Shows Possible Syrian Gas Attack Cubs Superfans Celebrate Wrigley's 100th Raw: Cattle Truck Overturns in Texas Admirers Flock to Dole During Kansas Homecoming Raw: Erupting Volcanoes in Guatemala and Peru Alibaba IPO Could Be Largest Ever for Tech Firm FBI Joining Probe of Suburban NY 'Swatting' Call U.S. Paratroopers in Poland, Amid Ukraine Crisis US Reviews Clemency for Certain Inmates Raw: Violence Erupts in Rio Near Olympic Venue Raw: Deadly Bombing in Egypt Raw: What's Inside a Commercial Jet Wheel Well Raw: Obama Arrives in Japan for State Visit Raw: Anti-Obama Activists Fight Manila Police Motels Near Disney Fighting Homeless Problem Michigan Man Sees Thanks to 'bionic Eye' S.C. Man Apologizes for Naked Walk in Wal-Mart Chief Mate: Crew Told to Escape After Passengers