WEBVTT - Bloomberg's Goyal on JCP: Managing Debt, Moving Forward (Audio)

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<v Speaker 1>Global business news twenty four hours a day at Bloomberg

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<v Speaker 1>dot com, the radio, plus globop and on your radio.

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<v Speaker 1>This is a Bloomberg Business Flash from Bloomberg World Headquarters.

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<v Speaker 1>I'm Katherine. Calorie Stocks are declining after the three main

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<v Speaker 1>benchmarks closed at all time highs yesterday. Drug makers are

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<v Speaker 1>weighing on the healthcare group, while rising consumer staples and

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<v Speaker 1>energy shares are offsetting some losses. Nords from As rallying

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<v Speaker 1>its quarterly profit beat projections. Utilities also higher after they

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<v Speaker 1>halted their longest losing streak yesterday since twelve which check

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<v Speaker 1>the markets every fifteen minutes throughout the trading day on

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<v Speaker 1>Bloomberg Radio. Down Industrial averages down fifty six points a

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<v Speaker 1>third of a percent at eighteen thousand, five D fifty eight,

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<v Speaker 1>SMP five hundred down four points to tents of a

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<v Speaker 1>percent one. The NAZAC is down four points a tenth

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<v Speaker 1>of a percent at fifty two twenty four West six

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<v Speaker 1>is Intermedia crude oil up ninety five cents of barrel

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<v Speaker 1>two point two percent at forty four forty five. Sparckled

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<v Speaker 1>down six dollars seventy since anounced at thirty and the

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<v Speaker 1>tenure Treasury is up eighteen thirty seconds with the yield

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<v Speaker 1>of one point. And that's the Bloomberg Business Flash. This

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<v Speaker 1>is Taking Stock with Gadlee, Hayes and grim Box on

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<v Speaker 1>Bloomberg Radio. All right, taking Stock, I am happy, I'm honored,

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<v Speaker 1>I'm privileged to join pim Fox today. The show I

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<v Speaker 1>listened to all the time, and so it's nice to

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<v Speaker 1>be a part of it right now. One of the

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<v Speaker 1>hottest stories of the day, after hitting triple highs on

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<v Speaker 1>the index is yesterday has really been the retail story.

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<v Speaker 1>We got the economic numbers in this morning. We continue

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<v Speaker 1>get retailers out and they are just ripping face. As

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<v Speaker 1>far as equities are concerned, j C. Penny is one

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<v Speaker 1>of those, up like six percent and change today. It

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<v Speaker 1>was up eight percent and change yesterday, but the company

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<v Speaker 1>posted a loss. Nonetheless, it's still a money loser. Here

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<v Speaker 1>to help us understand why it's a gaining in the

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<v Speaker 1>equity market after it's losing money again and again and

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<v Speaker 1>again for years and years, is Punam Goyal? Uh, Punam,

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<v Speaker 1>why don't you help me help me understand why investors

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<v Speaker 1>continue to buy this stock From your position as a

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<v Speaker 1>Bloomberg Intelligence, retail analyst. Why do you think investors like

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<v Speaker 1>this stock? They like it because it's it's losing money,

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<v Speaker 1>as you say, but it's not losing as much money

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<v Speaker 1>as it had in the past. It's a turnaround story, right.

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<v Speaker 1>So you saw them having seventeen billion dollars in sale

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<v Speaker 1>in twenty eleven, they dropped to twelve billion dollars and

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<v Speaker 1>now it's they're turned to fill that gap and they're

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<v Speaker 1>moving towards that. So that's why people like the story.

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<v Speaker 1>We saw negative earnings, but we're hoping by the end

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<v Speaker 1>of the year they will actually have positive earnings. That's

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<v Speaker 1>what consensus is expecting. So you may not be able

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<v Speaker 1>to say that again. Um. And and it's really a turnaround,

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<v Speaker 1>you know, people like turnaround stories. They're doing everything right

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<v Speaker 1>to turn the business around. From a sales perspective, you

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<v Speaker 1>see them coming back to private brands. They're focusing on online.

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<v Speaker 1>They just invested in buy online, pickup in store. They

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<v Speaker 1>have new merchandise and they're differentiating. That's the key really here.

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<v Speaker 1>So if you think about a May season of cold

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<v Speaker 1>and how they can set them apart, they're doing it

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<v Speaker 1>by adding appliances, focusing on window coverings, big ticket home essentially,

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<v Speaker 1>and that category is insulated from weather, which is something

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<v Speaker 1>that I think most retailers need to find a way

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<v Speaker 1>to address. How many years will it take them to

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<v Speaker 1>regain that seventeen billion in sales at the current run rate?

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<v Speaker 1>So if they grow sales at three percent per year

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<v Speaker 1>for the next ten years, they will get to seventeen billion.

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<v Speaker 1>And can they get to seventeen billion? While I offer

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<v Speaker 1>these promotions on a consistent basis, whether it's twenty five

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<v Speaker 1>percent off a hundred dollars or more or off under

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<v Speaker 1>a hundred dollars, Yeah, I think the promotions will stay

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<v Speaker 1>forever because that's what the customer wants. So I don't

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<v Speaker 1>think that's going to go away. And if you and

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<v Speaker 1>it's really about growing your sales with those promotions, so

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<v Speaker 1>it's getting new customers, it's adding new product lines. You know,

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<v Speaker 1>ten years is a long time from today, right, So

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<v Speaker 1>who knows what they'll get to. But I do see

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<v Speaker 1>them filling the gap. Sure I'm looking here. I just

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<v Speaker 1>clicking in the men's space on the website because I

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<v Speaker 1>saw him looking at it. Punam, I don't know anything.

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<v Speaker 1>I'm not as knowledgeable about women's clothing as Tom Keane.

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<v Speaker 1>But I do know, uh, from a man's perspective, you

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<v Speaker 1>don't want to be wearing cargo shorts, and there's no

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<v Speaker 1>reason to be wearing basic original bootcut jeans from Arizona

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<v Speaker 1>right now or just playing black uh Nike shoes like

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<v Speaker 1>this isn't stuff that people want. What are they selling?

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<v Speaker 1>So their stuff is more basic oriented, right, So you

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<v Speaker 1>you know, when you tell me you're not interested in

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<v Speaker 1>cargo pants, you're probably not their customer. So so think

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<v Speaker 1>of Middle America. I think of the American consumer. I

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<v Speaker 1>think of the household that makes about fifty five tho

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<v Speaker 1>dollars a year. They're really shopping for basic. Not everyone

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<v Speaker 1>is as fashion savvy as they are in New York,

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<v Speaker 1>California or some of the metro markets. So they're not

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<v Speaker 1>shopping Arizona, but maybe they're shopping another line that's more

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<v Speaker 1>fashion forward, like um, you know they have Liz Claiborne

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<v Speaker 1>in the store for the woman. So it's it really

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<v Speaker 1>depends on the customer that's coming into that store. Who

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<v Speaker 1>I'm who are they taking business away from. I think

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<v Speaker 1>they're taking back some business from Coals and Macy's, who

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<v Speaker 1>they had probably given up business to when they had

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<v Speaker 1>lost a five billion dollars in sales. They also um,

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<v Speaker 1>you know, you could say that even the discounts channel,

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<v Speaker 1>like whether it's a wal Martyr or the Target, that

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<v Speaker 1>they may have given up some share too, that customer

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<v Speaker 1>may be slowly coming back. Joe Joe Wisenthal was telling

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<v Speaker 1>me a little bit earlier that over a little a

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<v Speaker 1>little over ten percent of all retail sales in America

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<v Speaker 1>are online. That's why PIM goes to the website and

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<v Speaker 1>I'm checking it out to see what what kind of

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<v Speaker 1>presence they have their UM. I guess it's kind of

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<v Speaker 1>an reminiscent of an Amazon front page. But are they

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<v Speaker 1>doing well in this business? So they're not doing as

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<v Speaker 1>well as their competition is. That's because they haven't made

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<v Speaker 1>any investments in the space for the past five years

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<v Speaker 1>until recently. But the online space is definitely something that

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<v Speaker 1>they are participating. And they just launched buy online, pickup

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<v Speaker 1>in stores to all stories earlier this year and that's

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<v Speaker 1>actually helped them. So those that order stuff online and

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<v Speaker 1>pick it up in store, when they get that customer

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<v Speaker 1>to come in the in the store and I'm actually

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<v Speaker 1>stay in shop for something else, So the attachment rates

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<v Speaker 1>are pretty high. But now if they sell a graphics

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<v Speaker 1>T shirt for six dollars, does that mean that it

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<v Speaker 1>costs them about sixty cents and that maintains their margin?

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<v Speaker 1>Or is that wrong? I would I don't know about

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<v Speaker 1>sixty cents, but they definitely still have a margin on

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<v Speaker 1>that six dollar shirts. So they're not giving stuff away

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<v Speaker 1>for free when it's just at a regular discount or

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<v Speaker 1>what we consider regular discount off. It's when you start

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<v Speaker 1>to see seventy percent off is when I start to

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<v Speaker 1>get worried. And does that hurt companies such as Gap? Absolutely?

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<v Speaker 1>I mean, you know, any time retailer is promotional to

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<v Speaker 1>beyond a point where they're losing money, it's going to

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<v Speaker 1>affect their competition because they do need to compete where

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<v Speaker 1>they need to have product that's compelling enough that it

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<v Speaker 1>doesn't warrant a discount. The one thing I wonder about

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<v Speaker 1>is labor costs. It's not been helpful to see minimum

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<v Speaker 1>wage rise for fast food restaurants. Is that hurting J? C.

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<v Speaker 1>Penny as well? It's going to be hurting everyone. I

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<v Speaker 1>mean a lot of retailers have taken out upon themselves

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<v Speaker 1>to raise minimum wage gap is one of them. J C.

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<v Speaker 1>Penny has an outright said that, but they're definitely exposed

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<v Speaker 1>to that. Thank you very much. Pronomcoy an expert when

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<v Speaker 1>it comes to retail. Our senior US retail analysts for

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<v Speaker 1>Bloomberg Intelligence, providing unique and real time research and context

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<v Speaker 1>in the variety of industries and markets, as well as

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<v Speaker 1>government factors that affect business. Our terminal customers can access

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<v Speaker 1>this function at b I go. This is Bloomberg. Coming

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<v Speaker 1>up on Bloomberg. It is a seven billion dollar a

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<v Speaker 1>year industry. It is growing twenty to twenty five cent

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<v Speaker 1>a year. Cannabis will find out about an online marketplace

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<v Speaker 1>for wholesalers.