Why I'm No Longer Worried About JC Penney

 | Aug 20, 2013 | 2:38 PM EDT
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Turnarounds don't start with a bang, they start with a whimper.

We got a whimper from J.C. Penney (JCP) this morning, but I like what I see. Despite incredibly long odds -- ad campaigns aimed at wealthy people, expensive merchandise, a housewares department that was meant to be Williams-Sonoma (WSM) and no couponing for ages -- CEO Mike Ullman was able to put up a breathing-room quarter that took the company's viability off the table.

Now, I know that when you do a double-digit decline in comp numbers when people are looking for 8% declines, it's definitely disappointing. But with the credibility that Ullman has given over many years (which comes from owning up to bad times when they are bad), when he says Penney will have $1.5 billion in cash at year's end and back-to-school season is good, that's enough to hang your hat on.

It is tough to be a buyer when the largest shareholder is hammering out a plan to sell all his stock. It's really difficult when the consumer feels like she's been hit by several two-by-fours -- the obliteration of her favorite department store and higher taxes and gasoline prices -- but you have to recognize that four short months ago people were talking about Penney not making it through the holidays. We just went through the tumultuous attack on Ullman from uber-shareholder Bill Ackman, an attack that made you think that the same-store sale numbers would be down 20%. This company was rumored just a month ago to have its credit cut off.

These problems are all past J.C. Penney now. It's viable. That's what the takeaway was from the quarter. It was ugly, it was not what the bulls wanted -- especially after the New York Post had us believing that comps were positive. But the idea that it was left for dead, Macy's (M) road kill? That's off the table.

Should you buy JCP? I want to see some of Ackman's sales made first. That guy is so angry, who knows what he will do.

But I am no longer worried about Penney closing down. That's a big deal, and it's worth more than the few pennies the stock has risen.

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