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Bloomberg's Goyal on JCP: Managing Debt, Moving Forward (Audio) · Bloomberg Intelligence

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  Speaker 1: of one point. And that's the Bloomberg Business Flash. This
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  Speaker 1: is Taking Stock with Gadlee, Hayes and grim Box on
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  Speaker 1: Bloomberg Radio. All right, taking Stock, I am happy, I'm honored,
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  Speaker 1: I'm privileged to join pim Fox today. The show I
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  Speaker 1: listened to all the time, and so it's nice to
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  Speaker 1: be a part of it right now. One of the
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  Speaker 1: hottest stories of the day, after hitting triple highs on
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  Speaker 1: the index is yesterday has really been the retail story.
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  Speaker 1: We got the economic numbers in this morning. We continue
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  Speaker 1: get retailers out and they are just ripping face. As
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  Speaker 1: far as equities are concerned, j C. Penny is one
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  Speaker 1: of those, up like six percent and change today. It
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  Speaker 1: was up eight percent and change yesterday, but the company
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  Speaker 1: posted a loss. Nonetheless, it's still a money loser. Here
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  Speaker 1: to help us understand why it's a gaining in the
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  Speaker 1: equity market after it's losing money again and again and
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  Speaker 1: again for years and years, is Punam Goyal? Uh, Punam,
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  Speaker 1: why don't you help me help me understand why investors
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  Speaker 1: continue to buy this stock From your position as a
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  Speaker 1: Bloomberg Intelligence, retail analyst. Why do you think investors like
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  Speaker 1: this stock? They like it because it's it's losing money,
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  Speaker 1: as you say, but it's not losing as much money
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  Speaker 1: as it had in the past. It's a turnaround story, right.
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  Speaker 1: So you saw them having seventeen billion dollars in sale
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  Speaker 1: in twenty eleven, they dropped to twelve billion dollars and
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  Speaker 1: now it's they're turned to fill that gap and they're
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  Speaker 1: moving towards that. So that's why people like the story.
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  Speaker 1: We saw negative earnings, but we're hoping by the end
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  Speaker 1: of the year they will actually have positive earnings. That's
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  Speaker 1: what consensus is expecting. So you may not be able
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  Speaker 1: to say that again. Um. And and it's really a turnaround,
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  Speaker 1: you know, people like turnaround stories. They're doing everything right
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  Speaker 1: to turn the business around. From a sales perspective, you
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  Speaker 1: see them coming back to private brands. They're focusing on online.
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  Speaker 1: They just invested in buy online, pickup in store. They
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  Speaker 1: have new merchandise and they're differentiating. That's the key really here.
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  Speaker 1: So if you think about a May season of cold
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  Speaker 1: and how they can set them apart, they're doing it
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  Speaker 1: by adding appliances, focusing on window coverings, big ticket home essentially,
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  Speaker 1: and that category is insulated from weather, which is something
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  Speaker 1: that I think most retailers need to find a way
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  Speaker 1: to address. How many years will it take them to
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  Speaker 1: regain that seventeen billion in sales at the current run rate?
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  Speaker 1: So if they grow sales at three percent per year
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  Speaker 1: for the next ten years, they will get to seventeen billion.
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  Speaker 1: And can they get to seventeen billion? While I offer
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  Speaker 1: these promotions on a consistent basis, whether it's twenty five
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  Speaker 1: percent off a hundred dollars or more or off under
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  Speaker 1: a hundred dollars, Yeah, I think the promotions will stay
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  Speaker 1: forever because that's what the customer wants. So I don't
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  Speaker 1: think that's going to go away. And if you and
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  Speaker 1: it's really about growing your sales with those promotions, so
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  Speaker 1: it's getting new customers, it's adding new product lines. You know,
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  Speaker 1: ten years is a long time from today, right, So
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  Speaker 1: who knows what they'll get to. But I do see
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  Speaker 1: them filling the gap. Sure I'm looking here. I just
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  Speaker 1: clicking in the men's space on the website because I
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  Speaker 1: saw him looking at it. Punam, I don't know anything.
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  Speaker 1: I'm not as knowledgeable about women's clothing as Tom Keane.
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  Speaker 1: But I do know, uh, from a man's perspective, you
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  Speaker 1: don't want to be wearing cargo shorts, and there's no
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  Speaker 1: reason to be wearing basic original bootcut jeans from Arizona
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  Speaker 1: right now or just playing black uh Nike shoes like
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  Speaker 1: this isn't stuff that people want. What are they selling?
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  Speaker 1: So their stuff is more basic oriented, right, So you
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  Speaker 1: you know, when you tell me you're not interested in
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  Speaker 1: cargo pants, you're probably not their customer. So so think
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  Speaker 1: of Middle America. I think of the American consumer. I
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  Speaker 1: think of the household that makes about fifty five tho
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  Speaker 1: dollars a year. They're really shopping for basic. Not everyone
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  Speaker 1: is as fashion savvy as they are in New York,
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  Speaker 1: California or some of the metro markets. So they're not
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  Speaker 1: shopping Arizona, but maybe they're shopping another line that's more
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  Speaker 1: fashion forward, like um, you know they have Liz Claiborne
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  Speaker 1: in the store for the woman. So it's it really
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  Speaker 1: depends on the customer that's coming into that store. Who
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  Speaker 1: I'm who are they taking business away from. I think
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  Speaker 1: they're taking back some business from Coals and Macy's, who
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  Speaker 1: they had probably given up business to when they had
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  Speaker 1: lost a five billion dollars in sales. They also um,
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  Speaker 1: you know, you could say that even the discounts channel,
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  Speaker 1: like whether it's a wal Martyr or the Target, that
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  Speaker 1: they may have given up some share too, that customer
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  Speaker 1: may be slowly coming back. Joe Joe Wisenthal was telling
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  Speaker 1: me a little bit earlier that over a little a
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  Speaker 1: little over ten percent of all retail sales in America
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  Speaker 1: are online. That's why PIM goes to the website and
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  Speaker 1: I'm checking it out to see what what kind of
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  Speaker 1: presence they have their UM. I guess it's kind of
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  Speaker 1: an reminiscent of an Amazon front page. But are they
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  Speaker 1: doing well in this business? So they're not doing as
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  Speaker 1: well as their competition is. That's because they haven't made
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  Speaker 1: any investments in the space for the past five years
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  Speaker 1: until recently. But the online space is definitely something that
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  Speaker 1: they are participating. And they just launched buy online, pickup
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  Speaker 1: in stores to all stories earlier this year and that's
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  Speaker 1: actually helped them. So those that order stuff online and
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  Speaker 1: pick it up in store, when they get that customer
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  Speaker 1: to come in the in the store and I'm actually
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  Speaker 1: stay in shop for something else, So the attachment rates
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  Speaker 1: are pretty high. But now if they sell a graphics
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  Speaker 1: T shirt for six dollars, does that mean that it
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  Speaker 1: costs them about sixty cents and that maintains their margin?
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  Speaker 1: Or is that wrong? I would I don't know about
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  Speaker 1: sixty cents, but they definitely still have a margin on
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  Speaker 1: that six dollar shirts. So they're not giving stuff away
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  Speaker 1: for free when it's just at a regular discount or
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  Speaker 1: what we consider regular discount off. It's when you start
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  Speaker 1: to see seventy percent off is when I start to
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  Speaker 1: get worried. And does that hurt companies such as Gap? Absolutely?
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  Speaker 1: I mean, you know, any time retailer is promotional to
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  Speaker 1: beyond a point where they're losing money, it's going to
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  Speaker 1: affect their competition because they do need to compete where
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  Speaker 1: they need to have product that's compelling enough that it
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  Speaker 1: doesn't warrant a discount. The one thing I wonder about
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  Speaker 1: is labor costs. It's not been helpful to see minimum
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  Speaker 1: wage rise for fast food restaurants. Is that hurting J? C.
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  Speaker 1: Penny as well? It's going to be hurting everyone. I
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  Speaker 1: mean a lot of retailers have taken out upon themselves
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  Speaker 1: to raise minimum wage gap is one of them. J C.
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  Speaker 1: Penny has an outright said that, but they're definitely exposed
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  Speaker 1: to that. Thank you very much. Pronomcoy an expert when
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