Ron Johnson Has What It Takes for J.C. Penney Company, Inc. (JCP)

The biggest coupon of all
J.C. Penney may not be couponing on a frequent basis like it used to (it currently has a “spend $10, get $10” not-coupon circulating), but the company is selling one thing at dirt cheap prices — its shares.

JCP is priced as if things will never improve from where they are today. It is priced as if the store transformation will remain at 12% of total square footage. It is priced as if $134 per square foot will be its earnings in perpetuity. The stock price takes into account the massive capital outlays of 2012 and the future, but it does not recognize the benefits of those expenditures. Johnson’s elimination of legacy systems and overall operating efficiency efforts have already saved in excess of $1 billion and will continue to do so in the future. There are only a handful of mini-boutiques currently available in that 12% of renovated store space. By the end of the process, there will be 100. This is all funded by company coffers — no additional debt to be found.

Now, this stock is not for the get-rich-quick, the frequent-stock-checker, or the light sleeper. J.C. Penney is a soon-reversing deep-value play that will reward the multiyear, patient shareholder who believes in Ron Johnson’s efforts, mistakes and all. I’m not expecting sales to blow estimates out of the water anytime soon, but I do have faith in that $269-per-square-foot seed of future earnings potential. As a rare shopper and all-around retail curmudgeon, I too am reluctant to admit that a J.C. Penney could ever become a shopping destination. But I am of the (increasing) few who has seen the new mini-boutiques, and it’s truly compelling.

Retail requires tremendous innovation to remain relevant in the attention-deficient consumer environment. And, as with any true disruptor, J.C. Penney will have to claw at every customer to show why it’s the future of mall shopping. Mr. Johnson, you can mark one early adopter off the list.

The article Ron Johnson Has What It Takes for JCP originally appeared on Fool.com and is written by Michael B. Lewis.

Fool contributor Michael B. Lewis has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple.

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