Bill Ackman and his hedge fund Pershing Square Capital Management have been in the headlines constantly this year. But amid news that the activist investor has resigned from the board of JCPenney (JCP), it might finally be time for Ackman to fade away.
JCPenney has been a dumpster fire for more than a year, ever since Apple (AAPL) exec Ron Johnson blew up the company with quirky plans like store-within-a-store marketplaces and the end of big one-day sales and coupons. Sales imploded, and JCPenney stock has crashed almost 70% from its February 2012 high as a result.
Bill Ackman was a big advocate of this ill-advised shift at JCP, and was convinced that JCPenney stock could mount a fairytale comeback. But ever since Ron Johnson was fired and replaced with old-guard CEO Mike Ullman — who headed up JCPenney from 2004 until 2011 during some ugly years for the retailer — it has been clear that the company’s board is not interested in Bill Ackman’s dreams of a turnaround.
Ackman made a fuss last week saying he’d lost confidence in Penney’s board and that its chairman, Thomas Engibous, should be replaced … but since then, the only person in the hot seat has been Ackman himself. Even Starbucks (SBUX) CEO Howard Schultz went on record saying that if anyone should leave JCPenney, it is Bill Ackman.
And so today, Ackman officially parted way with the board by resigning his seat. One can assume this means Ackman also will be drawing down Pershing Square’s investment in JCPenney stock, too.
JCP certainly will remain in the news. There are increasing concerns about JCPenney stock facing a liquidity crunch after disputed reports that it was having trouble with commercial lender CIT Group (CIT), and the company continues to operate deeply in the red. Worse is that the retailer has posted even deeper losses than expected for more than a year, and when JCPenney reports Q2 earnings on Aug. 20, it could be another ugly quarter.
But JCPenney stock, its balance sheet and its earnings deserve to be in the news — and investors are right to care about them, and to trade the news.
My take? Look at the long-term trend at Sears Holdings (SHLD) and Best Buy (BBY), and you’ll see that outside of some short squeezes, these old brick-and-mortar plays don’t have any hopes of a turnaround. Their best days behind them, and they are the fodder for short sellers and day traders — little more.
This is the narrative investors should care about regarding JCPenney stock.
However, Bill Ackman and Pershing Square are just a distraction and an example of the hubris that is inherent in Wall Street bigwigs. And while it has been fun to spend some of the summer months mocking him for his bonehead call on JCP and his ill-advised short of diet supplement stock Herbalife (HLF), it’s time to spend our brainpower elsewhere.
It’s time to forget about Bill Ackman, everybody.
- Even if rumors of JCPenney liquidity issues aren’t true now … they will be soon. (The Slant)
- Penney named Ronald Tysoe as a director to fill Ackman’s seat on the JCPenney board. (AP via Daily Finance)
- Nathan Vardi riffs on Ackman’s Herbalife nightmare. (Forbes)
- In Ackman’s defense, why Mike Ullman isn’t exactly a savior. (Businessweek)
- SBUX CEO Schultz calls Ackman “despicable.” (Huffington Post)
Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at firstname.lastname@example.org or follow him on Twitter via @JeffReevesIP. As of this writing, he did not own a position in any of the stocks named here.