With J.C. Penney‘s awful fourth-quarter results, William A. Ackman has found success in retail investments elusive once more.
It’s hard to call J.C. Penney’s latest quarterly report anything but breathtaking. The retailer lost $552 million for the quarter, which at $1.95 a share far exceeded the 17-cent loss that analysts had been expecting. Same-store sales tumbled nearly 32 percent from the same time a year ago.
Shares in the company were down nearly 9 percent in after-hours trading.
So far, J.C. Penney’s chief executive, Ron Johnson — whom Mr. Ackman recruited from Apple — has asked for patience, citing all the changes that he has rolled out at the formerly dowdy department store chain. (Indeed, he spent the first several minutes of an investor Webcast on Wednesday enumerating the many innovations at the store.)
One wonders whether Mr. Ackman, whose Pershing Square Capital Management owns a 17.8 percent stake in J.C. Penney, can wait that long.
It isn’t the first time that he has taken a bath betting on a retailer. Mr. Ackman’s most recent failure in the industry was a bet on the Borders Group, taking a 17 percent stake in the troubled bookseller by late 2007.
Despite efforts by the hedge fund manager to help prop up the company, including offering to finance a merger with the much larger Barnes & Noble, Borders filed for bankruptcy in late 2010. Mr. Ackman has acknowledged losing at least $125 million on the investment.
Perhaps his most notable troubled investment was in Target, a wager in which Mr. Ackman actually created a special fund dedicated to the discount retailer. He also embarked on a lengthy and expensive campaign to gain seats on the company’s board, to forcefully advocate for a complicated restructuring he said would generate better returns for shareholders.
That didn’t quite work out either. Mr. Ackman lost the proxy fight. He sold Pershing’s stake by early 2011, having lost about 90 percent of his firm’s $2 billion investment.
Last month, it appeared that Mr. Ackman was willing to give Mr. Johnson room to prove naysayers wrong. “We put Ron in charge, and we’re letting him run the company,” the hedge fund manager told CNBC in an interview.
But he added that he’ll run out of patience — in three year’s time.
“If three years from now, Ron Johnson is still struggling to turn around J.C. Penney,” Mr. Ackman said to CNBC, “he’s probably the wrong guy.”
DealBook: J.C. Penney’s Poor Showing Is Another Retail Miss for Ackman
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DealBook: J.C. Penney’s Poor Showing Is Another Retail Miss for Ackman
