Ex-New York City Mayor Ed Koch was famous for walking around the city and asking residents, “How am I doing?” Wouldn’t it be great if Wall Street CEOs did the same?
I know I’d have some feedback.
Wall Street is littered with a number of banged-up businesses with hopes of turning things around. For instance, Office Depot (NYSE:ODP) boomed last week amid news of activist-investor interest. But as InvestorPlace colleague Dan Burrows points out, the idea behind the stock surge had nothing to do with any plans of improving Office Depot — it really had to do with the mere hope that a little red-hot poker could jostle management.
But what about companies who aren’t acting under outside pressure to “unlock” shareholder value as much as they actually want to create it — through concrete action — in an effort to make a bad company better?
I have three stocks in mind — and while they aren’t exactly 10 minutes from bankruptcy, they are struggling enough that big changes have become necessary to hold the fort together. How are they doing? Let’s find out:
To say J.C. Penney (NYSE:JCP) is in a tough spot would be a gross understatement. Sales against any measure are lagging, and JCP is getting killed from all sides by Wal-Mart (NYSE:WMT), Kohl’s (NYSE:KSS) and Macy’s (NYSE:M), just to name a few. The company brought in Apple (NASDAQ:AAPL) marketing wunderkind Ron Johnson late last year to turn around its fortunes. How is he doing?
Strategy: Roll out a “new” JCP focused on “Fair and Square Pricing,” and store-within-a-store marketing, with around 80 to 100 of these stores located in every JCP location by 2015.
Reality: Well, so far the company has rolled out the store-within-a-store concept to about 700 of its stores, with a minimum “10-shop” model in each one. JCP is working fairly successfully to integrate the stores with more names, perhaps the biggest (certainly the most contentious, if you ask Macy’s) being the Martha Stewart Living (NYSE:MSO) line. It’s still a long way from done, but at least some momentum on the strategy is proceeding.
Results: So far, so bad. Second-quarter revenues and profits were ugly — though admittedly not as bad as Q1’s in May — and the company continues to lay off employees. JCP shares are down 17% year-to-date, though that’s including a market-crushing 30% rally in the past three months.
What’s Next? Rolling out more brands into more stores certainly can’t hurt, though providing free haircuts to kids seems like more of a stretch. The upcoming holiday season is critical to Johnson & Co., who will find out whether they scared customers off for good. At least on that front, there’s some promise.