J.C. Penney Is Probably Going Bankrupt: Davidowitz

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Nov. 20 (Bloomberg) -- Howard Davidowitz, chairman at Davidowitz & Associates, discusses why he believes J.C. Penney needs to file for bankruptcy protection to survive. He speaks on Bloomberg Television’s “Bloomberg Surveillance."

Witz and associates is here.

Here with than $19 billion in may and now $13 billion.

They can't work.

They desperately need to restructure.

They need to shrink the company.

Given the crazy loan agreements they did, the asset base, it seems to me it could only be done in bankruptcy.

I think it will happen.

Whether 18 months or 12 months.

I don't think this country is survivable.

This holiday season?

Of course, and it can probably sweep through next year.

I give the company long-term, 18 months from now, more than likely chapter 11 because that is what is needed.

It's got to shrink the number of stores.

If you look at who they appealed to, the middle class, even cold --, the best middle-class retailer is hurting.

Sears became even this dust.

-- cannot even be discussed.

It is shrinking.

One out of six in poverty in this country.

Another one out of 61 inch away from poverty.

77% of on the jobs are part- time's. the bifurcation of america at's is getting hit.

They are being killed.

The worst place to be in is in the middle.

If you want to produce people in poverty, we are doing a hell of a job.

Of the department stores are in the middle.

You say jcpenney can go into bankruptcy but do they have a long-term survival prognosis?

Nobody needs any and nobody needs sears but kohl's, if you look at their metrics, their costs are seven points lower than anyone else.

One level -- essential check out.

The winner in the middle will bekohl's, and they should be.

I wonder if a person can be made between jcpenney and best buy.

Both in turnaround mode.

The ceo of best buy have been able to turn things around the little bit.

There are massive differences, of course, because even if his platform is to match prices online he has the advantage of higher margin items that can push out and they can focus on specialized customer service.

J.c. penney does not have any of that and they are dealing with 500 stores of that have been remodeled under ron johnson who are not using the space.

And the lesson that whoever takes over dc he can learn from best buy?

I don't think so.

I think the difference between best buy and pennies is best buy did not go mentally crazy.

In other words, jcpenney was the craziest performance i have ever seen in the history of retail business.

I never saw change -- the strategy.

Not only 100% wrong than crazy but they did 100 things at once, most of them crazy.

In other words, they went nuts.

It a try to invest in a company, they try to make changes, they just did not have a good sense of who the customer was.

They made all the changes at once and they made all the changes overnight, and the wounded -- they booted all their customers out.

You would call that mentally deranged.

They threw out customers -- no coupons.

That is my -- not right.

Did ron johnson put the company and a death spiral or did he just accelerated?

Would it have died anyway?

Mike ullman was doing stuff, some of the positive.

He started to introduce shops.

He seemed to be doing ok in the cosmetics business.

The company made three dollars a share.

Did it have terrible metrics?

Lowest sales per square foot of any department store, and stuff like that.

But he was running a survivable company.

Maybe it could have been fixed.

It has been destroyed.

Combination of ackman, of course.

The combination that came in was so toxic, so crazy, it destroyed the business.

It is also curbing gross margin as well.

We are seeing it below 30% after ron johnson left and ullman returned.

Bill ackman -- it attracted a certain kind of investor, hedge fund type expecting some kind of turnaround chapter 11. what does it do for a company strategy when you have short- term investors?

It is a horror.

Ullman is a decent guy in a sound retailer.

He is not a superstar but a heat -- he is a solid guy.

He will be on the phone all day with these loons --do this, do that, by this, by that.

Why aren't the shares up?

Is is a huge distraction for mike ullman and his management team.

The last thing you need right now.

He's got so much work to do.

Think about the people who work in this company.

As is the kind of company where people work a lifetime.

They have pensions.

They are loyal.

Think about what happened to this company.

Chapter 11, if it gets that far, are those the things that are going to go away?

Everything will go away and then you will have the hedge fund doing the financing.

There will be a chance if you can dramatically shrink the number of stores.

Use them only -- you simply cannot slash sales so much and keep the stores.

The numbers will not work.

In five years can tom keene still by his bow from jcpenney ending sears?

Tom keene to do anything tom keene once.

And mike mckee by his bowties there?

No, only tom keene.

Howard davidowitz from davidowitz and associates.

His view of jcpenney.

Not yet -- in his words -- out of the.

Interesting note, vanguard funds owned 165 million shares of jcpenney and only 6 million of amazon.

Which would you that -- rather own?

Our twitter question.

Is it jeff bezos a more important amazon than steve jobs to apple?

Tweet us @. this is "bloomberg surveillance"

This text has been automatically generated. It may not be 100% accurate.


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