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

its quarterly profit beat projections. Utilities also higher after they halted their longest losing streak yesterday since twelve which check the markets every fifteen minutes throughout the trading day on Bloomberg Radio. Down Industrial averages down fifty six points a third of a percent at eighteen thousand, five D fifty eight, SMP five hundred down four points to tents of a

percent one. The NAZAC is down four points a tenth of a percent at fifty two twenty four West six is Intermedia crude oil up ninety five cents of barrel two point two percent at forty four forty five. Sparckled down six dollars seventy since anounced at thirty and the tenure Treasury is up eighteen thirty seconds with the yield of one point. And that's the Bloomberg Business Flash. This is Taking Stock with Gadlee, Hayes and grim Box on

Bloomberg Radio. All right, taking Stock, I am happy, I'm honored, I'm privileged to join pim Fox today. The show I listened to all the time, and so it's nice to be a part of it right now. One of the hottest stories of the day, after hitting triple highs on the index is yesterday has really been the retail story. We got the economic numbers in this morning. We continue get retailers out and they are just ripping face. As far as equities are concerned, j C. Penny is one

of those, up like six percent and change today. It was up eight percent and change yesterday, but the company posted a loss. Nonetheless, it's still a money loser. Here to help us understand why it's a gaining in the equity market after it's losing money again and again and again for years and years, is Punam Goyal? Uh, Punam, why don't you help me help me understand why investors continue to buy this stock From your position as a

Bloomberg Intelligence, retail analyst. Why do you think investors like this stock? They like it because it's it's losing money, as you say, but it's not losing as much money as it had in the past. It's a turnaround story, right. So you saw them having seventeen billion dollars in sale in twenty eleven, they dropped to twelve billion dollars and now it's they're turned to fill that gap and they're moving towards that. So that's why people like the story.

We saw negative earnings, but we're hoping by the end of the year they will actually have positive earnings. That's what consensus is expecting. So you may not be able to say that again. Um. And and it's really a turnaround, you know, people like turnaround stories. They're doing everything right to turn the business around. From a sales perspective, you see them coming back to private brands. They're focusing on online. They just invested in buy online, pickup in store. They

have new merchandise and they're differentiating. That's the key really here. So if you think about a May season of cold and how they can set them apart, they're doing it by adding appliances, focusing on window coverings, big ticket home essentially, and that category is insulated from weather, which is something that I think most retailers need to find a way to address. How many years will it take them to regain that seventeen billion in sales at the current run rate?

So if they grow sales at three percent per year for the next ten years, they will get to seventeen billion. And can they get to seventeen billion? While I offer these promotions on a consistent basis, whether it's twenty five percent off a hundred dollars or more or off under a hundred dollars, Yeah, I think the promotions will stay forever because that's what the customer wants. So I don't

think that's going to go away. And if you and it's really about growing your sales with those promotions, so it's getting new customers, it's adding new product lines. You know, ten years is a long time from today, right, So who knows what they'll get to. But I do see them filling the gap. Sure I'm looking here. I just clicking in the men's space on the website because I saw him looking at it. Punam, I don't know anything. I'm not as knowledgeable about women's clothing as Tom Keane.

But I do know, uh, from a man's perspective, you don't want to be wearing cargo shorts, and there's no reason to be wearing basic original bootcut jeans from Arizona right now or just playing black uh Nike shoes like this isn't stuff that people want. What are they selling? So their stuff is more basic oriented, right, So you you know, when you tell me you're not interested in cargo pants, you're probably not their customer. So so think

of Middle America. I think of the American consumer. I think of the household that makes about fifty five tho dollars a year. They're really shopping for basic. Not everyone is as fashion savvy as they are in New York, California or some of the metro markets. So they're not shopping Arizona, but maybe they're shopping another line that's more fashion forward, like um, you know they have Liz Claiborne in the store for the woman. So it's it really

depends on the customer that's coming into that store. Who I'm who are they taking business away from. I think they're taking back some business from Coals and Macy's, who they had probably given up business to when they had lost a five billion dollars in sales. They also um, you know, you could say that even the discounts channel, like whether it's a wal Martyr or the Target, that they may have given up some share too, that customer

may be slowly coming back. Joe Joe Wisenthal was telling me a little bit earlier that over a little a little over ten percent of all retail sales in America are online. That's why PIM goes to the website and I'm checking it out to see what what kind of presence they have their UM. I guess it's kind of an reminiscent of an Amazon front page. But are they doing well in this business? So they're not doing as

well as their competition is. That's because they haven't made any investments in the space for the past five years until recently. But the online space is definitely something that they are participating. And they just launched buy online, pickup in stores to all stories earlier this year and that's

actually helped them. So those that order stuff online and pick it up in store, when they get that customer to come in the in the store and I'm actually stay in shop for something else, So the attachment rates are pretty high. But now if they sell a graphics T shirt for six dollars, does that mean that it costs them about sixty cents and that maintains their margin? Or is that wrong? I would I don't know about sixty cents, but they definitely still have a margin on

that six dollar shirts. So they're not giving stuff away for free when it's just at a regular discount or what we consider regular discount off. It's when you start to see seventy percent off is when I start to get worried. And does that hurt companies such as Gap? Absolutely?

I mean, you know, any time retailer is promotional to beyond a point where they're losing money, it's going to affect their competition because they do need to compete where they need to have product that's compelling enough that it doesn't warrant a discount. The one thing I wonder about is labor costs. It's not been helpful to see minimum wage rise for fast food restaurants. Is that hurting J? C.

Penny as well? It's going to be hurting everyone. I mean a lot of retailers have taken out upon themselves to raise minimum wage gap is one of them. J C. Penny has an outright said that, but they're definitely exposed to that. Thank you very much. Pronomcoy an expert when it comes to retail. Our senior US retail analysts for Bloomberg Intelligence, providing unique and real time research and context in the variety of industries and markets, as well as

government factors that affect business. Our terminal customers can access this function at b I go. This is Bloomberg. Coming up on Bloomberg. It is a seven billion dollar a year industry. It is growing twenty to twenty five cent a year. Cannabis will find out about an online marketplace for wholesalers.