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I noticed something strange as I browsed the financial news whilst enjoy my morning coffee. In London, Tesco’s share price (LSE:TSCO) had risen nearly 15%, partly on the report of good December sales and partly because CEO Dave Lewis had announced plans to close 43 of its stores in the UK. Then, “what before my wondering eyes should appear,” but a similar story about J.C. Penney right here (in the U.S.).
J.C. Penney’s share price (NYSE:JCP) was up 0.63% partly on its report of good December sales and partly because CEO Mike Ullman had announced plans to close 40 of its stores in 2015. I began to wonder if I was reading the same information printed under two separate titles! Once I realized that the two stories were actually separate and apart from each other, I had to dig a little deeper. What does this mean for investors?
December Sales
- JCP reported a 3.7% grow in like-for-like, year-on-year sales in December
- TSCO reported a 0.3% growth in like-for-like, year-on-year sales in December
- JCP’s market cap is $2.42 billion USD
- TSC’s market cap is $16.96 billion
Share Price Performance
- JCP’s 52-week range is 4.90 – 11.30. Two years ago JCP traded at 18.99.
- TSCO’s 52-week range is 155.40 – 341.58. Two years ago TSCO traded at 351.00.
- At today’s close of 7.95, JCP is down 29.6% from 8 January 2013.
- At today’s close of 209.25, TSCO is down 40.4% from 8 January 2013.
Revenues
- JCP’s revenues have declined30.8% from $17.2 billion in 2012 to $11.9 billion in 2014.
- TSCO’s revenues have declined 0.48% from $63.9 billion in 202 to $63.6 billion in 2014.
Operating Income
- JCP’s operating income for 2014 was ($1.42 billion), its third consecutive annual decline.
- TSCO’s pre-tax income for 2014 was $2.99 billion, its third consecutive annual decline.
- JCP’s EPS is (2.22).
- TSCO’s EPS is 0.02.
What in the world is going on?
In case it’s not obvious, both companies are in trouble. The difference is that Tesco’s problems are like a mosquito sitting on an elephant’s butt, whilst J.C. Penney’s are more like an elephant sitting on a mosquito.
NBC News indicated that J.C. Penney had been (finally) listening to analysts. BBC News, on the other hand, quoted Dave Lewis as “seeing the benefit of listening to our customers.” I will almost always advocate listening, but I will always advocate listening to your customers. Frankly, J.C. Penney stopped listening to their customers a long time ago, brought in an ivory-tower idiot a few years ago, re-conceived their stores, and drove customers away from what had once been comfortable for them.
Tesco will be closing stores to try to turn the ship around. Generally, with the exception of some people in the areas where the closures will take place, the populace – and investors – seem to be responding well. J.C. Penney will be closing stores to try to keep the ship from sinking. Generally, people are worried. Tesco is implementing an act of strategy. J.C. Penney is implementing an act of desperation. I believe that, for Tesco it is the right move at the right time, but for J.C. Penney, it may be too little too late.
How the share prices continue to fare this month should indicate what investors think.
