JCP Investor Day Preview

by Dan September 18, 2012 3:40 pm • Commentary

Event: Tomorrow JCP is hosting their highly anticipated launch of their new store format at their corporate headquarters in Plano, Texas.    CEO Ron Johnson (former head of retail at Apple) has a lot riding on his ability to transform JCP’s shopping experience, as he attempts to re-brand the company, and will be hosting analysts at their Investor day to talk about the transformation and answer questions on a call at 2:45pm eastern.     

Implied Move: The options market is treating the Investor Day like an earnings event, implying about a 7% move for the rest of the week, (the Sept 29 straddle is offered at $2.05, that means the stock would need to be above 31.05 or below 26.95 to break-even if you bought the move).

Price Action/Sentiment: While the stock is still down 17.5% ytd, it is up 50% from the July lows.  The stock is trading less on fundamentals and more as a “special situation”.  Activist investors have taken large stakes and have placed their bets that CEO Johnson can sprinkle a little bit of his Apple pixie dust on the beleaguered retailer.

Wall Street analysts remain very skeptical with only 5 Buys, 12 Holds and 3 Sells and avg 12 month price target of $26 which is below the current price.

My View:  The company pulled giving forward guidance earlier in the year, so other than some color on comp sales I wouldn’t expect much on the financial front.  That said if the CEO does not speak to improving comps during the back to school season the stock could get nailed given the recent run up.  My sense would be that the CEO will try to buy as much time as possible as they head into the holiday season that could be make or break for his tenure.

Assuming that the company does not put out a press release in the morning there will be time to evaluate a few different trades prior to the QnA at 2:45pm, with Sept Vol so pumped, I want to sell that to buy anything in Oct or Nov depending on directional bias.