And then again, sometimes you can win by doing nothing, doing nothing but going against flailing and faltering competitors who seem to be flummoxed and floundering in unfathomable ways. Or to put it another way, you can be lucky enough to compete against J.C. Penney and Walgreen.
On Monday night, J.C. Penney announced the departure of Michael Francis, a key executive who had been brought over from Target to help Ron Johnson turn around JCP. Francis was part of the dream team that Johnson, late of Apple, put together to re-invent Penney in a fresh, imaginative way and wean its customers off the "high initial markup and then coupon down" strategy that had been Penney's modus operandi.
Johnson is already, I believe, way over his head in this attempted turnaround, one that racked up horrendous down-18 percent comparable store sales in the most recent tally, and now he intends to take over the merchandising as well as the overall running of the stores.
Frankly, J.C. Penney, while it is still early on under the reins of Johnson, seems to have totally lost its way. Some of it may be because Johnson seems barely engaged; he has yet to move to Penney's headquarters in Plano, Texas. Some of it might be because the company has no raison d'etre. And some of it might be because the store's longtime customers can't understand or fathom what the heck is happening.
The result? There are billions in sales up for grabs, and those sales are going to Target, to Macy's, and to Wal-Mart. Penney is the gift that keeps on giving, not just to the short-sellers but to this troika of very lucky competitors.As for Walgreen, ever since it declared war on Express Scripts, formerly its pharmacy benefit manager, it seems to be all downhill for this gigantic drugstore chain. Customers have been fleeing to competitor CVS Caremark, as demonstrated by the 9.9 percent decline in comparable pharmacy sales that Walgreen announced today.
Walgreen, rather than trying to stem the defections, today announced that it has taken a 45 percent stake in Alliance Boots, a gigantic U.K. drugstore chain, for $6.7 billion. To which I say, "What the heck?" Is spending a fortune buying a portion of a global chain of drugstores the way to reverse the defections to CVS?
I don't think so.
Retail is a tough business. Going from domestic--which is, frankly, one of the things I liked about Walgreen--to international at a time when international could pull down the strongest U.S. company, doesn't make a lot of sense to me, especially when you pay a price per earnings that is much higher than the acquirer trades at.
Going in a host of directions at once, as Penney is trying to do, doesn't make a lot of sense either.
Maybe WAG and JCP can pull off these aggressive growth plans. But in the meantime, I say they are terrific reasons to buy their competitors, as their failures play right into the hands of the stores right next door to their own operations.
Disclosure: Cramer's charitable trust is long CVS.
