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By Svea Herbst-Bayliss and Jonathan Stempel
NEW YORK Nov 18 J.C. Penney Co has a
fan in hedge fund manager Marc Lasry, who says the struggling
retailer is likely to survive after an ambitious reinvention
failed, its stock price tumbled and its biggest investor exited.
"In J.C. Penney, we believe there is a 75 percent chance of
it working out," Lasry, who runs the $12 billion Avenue Capital
Group with his sister, Sonia Gardner, said at the Reuters Global
Investment Summit in New York.
Avenue bought J.C. Penney debt at between 60 cents to 65
cents on the dollar and expects its investments to pay off
within a relatively short amount of time, Lasry said.
He is making his case even after the retailer's stock price
tumbled 48 percent in the quarter that ended Sept. 30.
During that period, the company's biggest investor, Pershing
Square Capital Management's William Ackman, sold his 39 million
shares, and J.C. Penney said it would raise money not long after
Chief Executive Myron "Mike" Ullman said it had no immediate
need to do so.
Ullman has been trying to revive J.C. Penney after an
ill-fated attempt to move the 111-year-old department store
chain up-market by his predecessor, former Apple Inc
executive Ron Johnson. After only 17 months on the job, Johnson
J.C. Penney's sales plunged and its cash stake declined as
Johnson ended coupons, and shifted the retailer's focus toward
trendier merchandise and away from popular in-house brands such
as St. John's Bay, which Ullman is re-emphasizing.
The Plano, Texas-based company ended its fiscal second
quarter with $1.54 billion of cash. Results for its fiscal
third quarter, ended in October, are scheduled for release on
J.C. Penney on Nov, 7 reported its first monthly same-store
sales gain in nearly two years, albeit from depressed levels,
after the retailer resumed deep discounting and the stocking of
merchandise that longtime shoppers liked..
Lasry said J.C. Penney has survived in part because, prior
to its recent troubles, it had been conservatively positioned,
having borrowed little money. He said that should stand it in
good stead as top management tries to lure shoppers back.
"J.C. Penney was viewed as Middle America, that was their
model," Lasry said. "That worked for decades."
Lasry said he remains optimistic about turnaround, saying
the company's balance sheet is strong enough to give management
five years to turn things around, though only a year or two will
"The whole play on J.C. Penney is, when does the cash burn
stop ... Our view is it's sort of a six-month or one-year
process, but you have the luxury of time because of that cash,"
Other investors are holding out for a recovery of the
Billionaire investor George Soros owned 19.9 million shares
at the end of September, keeping his stake steady, while hedge
funds Highfields Capital, Farallon Capital Management and Jana
Partners took small stakes in the company.
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(Reporting by Svea Herbst and Jon Stempel; Editing by Steve