Of course, the story did not quite work out as planned. Same-store sales plummeted, and Johnson was gone by this past April. Now the hunt is on for a new CEO, one that can "really" turn the company around. The quest, of course, is being driven by Bill Ackman, whose firm is Penney's largest shareholder. It was Ackman that had the value crowd so riled up about the company in the first place. To his credit, Ackman has been a wise investor in many cases over the years, but this one has been a debacle so far. As a frequent attendee of the Value Investing Congress, I saw the presentations on J.C. Penney firsthand, and was enamored by the company's vast real estate holdings.
The investment lesson here is that you cannot put too much faith in one person, a CEO in this case, to turn around a struggling business, especially a mall-based retailer that is not relevant to anyone younger than 60. Although J.C. Penney does need a new CEO, it needs much more than that to turn around. I'd suggest starting with a name change, something memorable, something snappy. I'm not saying there's no value in the stock at this point; the company owns more than 400 locations, which is the one reason that I'm not as concerned about the $3.8 billion in debt as some may be. At some point, once everyone else gives up on the stock, I might take another look. It would not be the first time I've purchased a down-and-out retailer, but the price has to be right. Once the market has given up on a name and priced it for much less than its true value, even small steps of progress can be rewarded. But for now, the dust needs to settle. At the time of publication, Heller had no positions in stocks mentioned. Follow @JonMHellerCFA This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.