The thing that troubles me about J.C. Penney Company, Inc. (NYSE:JCP) is that it's always on the defense. If I'm going to invest in a company, it's not only going to be because the business knows how to fend off its rivals, but because it's ahead of the pack in some way. A trend-setter J.C. Penney Company, Inc. (NYSE:JCP) is not, and in fact if the business were a sports team my guess is that the fielders would be looking awfully tired by now.
It's been said that the best offense is a good defense, but in the case of J.C. Penney Company, Inc. (NYSE:JCP) that strategy just isn't working. The company's latest defensive move was to adopt a poison pill to temporarily stave off a takeover from any new investors looking to acquire more than a 10% stake. This is unfolding just as activist investor Bill Ackman, who in recent days resigned from the retailer's board and who has an 18% position in the company, mulls abandoning his holding.
Shares of the embroiled retailer are down more than 30% year-to-date. In the second quarter, which represented chief executive Mike Ullman's first full quarter at the helm, comparable-store sales fell nearly 12%, and the company's defense is that the sequential declines are becoming less severe. But the company isn't profitable, and sales in the recent quarter fell 13% to about $2.7 billion, pushing gross margins down to 29.6% from 33.2% in the year-ago period. Online sales were down, and once again the defense is that the decline is not as bad as it used to be. When are we going to see real growth?
J.C. Penney Company, Inc. (NYSE:JCP) is a company that -- like a team fighting for a wildcard spot -- can't afford to make any mistakes. With the stigma of the coupon events behind it, J.C. Penney Company, Inc. (NYSE:JCP) had every opportunity to regain its position of popularity among its customers. But it made a huge misstep in its marketing program when it launched an ad campaign that seemingly promoted bullying among children, and from the looks of the sales figures J.C. Penney Company, Inc. (NYSE:JCP)'s culture isn't resonating with consumers.
J.C. Penney claims to have a "rigorous" focus on marketing; it has earmarked $300 million for capex for the remainder of the year and pegs capex at $300 million again for fiscal 2014. Let's hope it's enough to put this company back in the game--but I'm not willing to consider the stock a buying opportunity at this point.
A business on offense
Take electric vehicle maker Tesla Motors Inc (NASDAQ:TSLA). Different industry, but in terms of innovation Tesla co-founder Elon Musk is not only on the offense--he's writing the playbook.
This doesn't mean the company doesn't need a defense. Analysts at Stifel Nicolaus expressed concerns because the company's nearest competition is closing in on Tesla Motors Inc (NASDAQ:TSLA), and is now only a year to a year and a half away. At that point, the company could face heightened pricing pressure for its offerings.