Ackman Has Left the Building

 | Aug 27, 2013 | 7:58 AM EDT  | Comments
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Stock quotes in this article:

jcp

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m

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tgt

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ltd

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tjx

Elvis has left the building and most likely he won't be returning to the world of retail anytime soon.

Bill Ackman announced the saga is over. Pershing Square is selling its 18% stake in J.C. Penney (JCP).

Was the last straw the recent, less-than-successful public wrestling match with the board that resulted in Ackman's resignation? Or was it Ackman's realization retail is just not his forte (see previous retail defeats Borders and Target (TGT))? The bottom line is Ackman is taking a 50% loss on the JCP trade and that should be enough of a signal for an investor feeling tempted to take a look at the stock.

In other words, if the cheerleader has put down the pom-poms half way through a losing game, maybe that is a sign. After all, that cheerleader has sat through all the practices. And Vornado might not be far behind with the sale of its remaining stake.

Ackman's departure will mean less drama and more focus on the actual business that is burning massive amounts of cash. But let's consider how this situation could fail to improve.

Despite incredibly easy comparisons, comps are not really improving (two-year trend in Q2 not much better than the mid-30s decline in Q1). Sure, the company said back to school is "encouraging," but positive comps may be a long way off. It is not that easy to win back a customer you told to head for the exits. These turnarounds take time and JCP does not have all that much time on its hands.  And let;s not forget, JCP is trying to come back in an environment where retailers are falling short at both ends of the spectrum.

If you are looking for a retail investment, think high-quality names like Macy's (M) TJX (TJX) and L Brands (LTD). JCP still has plenty of cleaning up to do.

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