New York, New York (PressExposure) April 01, 2013 -- Gilford Securities, a full-service investment firm, headquartered in New York City, reiterated their Sell rating for J.C. Penney (NYSE: JCP) in a research report issued to clients.
Reiterating the sell rating and thesis on the company, the analyst wrote, "Many investors over the last three decades became beguiled by the thought of finding a pot of gold in suburban retail real estate and came away severely chastened. The latest fairy dust is to convert 300 of the best Penney stores into REITs, lease the space and voila--$40 per share. More than a few things have to be taken into consideration before believing in that black magic."
"The idea is to continue to operate the remaining 700 stores," the analyst continued, "How would that be possible if the best stores of a marginal retailer are removed from the fold? If the stores were to continue to operate, a massive reduction in staff a headquarters would be required to pare down expenses to reflect lower sales. What would be the severance and pension costs? What would be the costs if the weak stores implode? There would be costs to fire the entire field organization for 300 stores."
Highlighting other key points the analyst further stated: "A huge capital cost would be required to convert one-user space into multiple shops, discrete space operated by individual tenants. Walls would have to be erected. Heating and ventilation rerouted. Delivery of goods to stores with no exterior access would be a major problem."
In conclusion, the analyst said, "With e-commerce taking sales away from malls, the space might be difficult to fill, especially since mall traffic is declining and the Penney space is not in the main flow of traffic anyway. Moreover, Penney stores are not all in the best of malls. Many are in outdated fading malls. As a bankruptcy or liquidation this scenario might be worth considering, but not as an ongoing business. It was not done at Sears, and Vornado, which knows of such things, reduced its position in JCP."
About Gilford Securities
Founded in 1979 by senior officers of the former Blythe Eastman Dillon & Co., Gilford is a full-service boutique investment firm providing an array of financial services to institutional and retail clients including corporate finance services, independent equity research, equity sales and trading, retirement planning and wealth management. The firm's research effort targets select underserved niche segments in the small and middle capitalization market sector.