JC Penney (JCP) - We are working on this fast moving story. The credit community seems to be tightening their view of JCP and its credit worthiness. As of today an additional 2 factoring agencies according to our own independent research have added an additional percentage point or more that they charge to the vendor community in order to approve any orders to JCP. We know this is a change in their position since last week. This is not a good sign. Secondly, it is tax free weekend in Texas this weekend which will be VERY import gauge of the progress JCP is making in with respect to top line sales for the BTS period. The question we ask is Ackman's reaction to pressing for a new CEO reaction to the sales trend he sees at JCP the last two weeks. We certainly don't have any insight s of yet but yet, it is a question that is top of mind.
Gap (GPS) - We spoke yesterday morning about the potential top line sales miss by GPS. In fact we were correct but the stock is getting unjustly punished today. The bottom line EPS improvement is validation that GPS is best in class. We are disappointed that the investment community today is punishing the name. If their reaction is to the top line miss then investors are missing the point. July is a very insignificant month with respect to both volume and most important, GPS is ending the season clean and ready to start the BTS season. Their top line sales compared to 2012, which was a double digit increase ,was near impossible to beat considering the current retail climate and the shifting of events from July2013 into June2013.We think is being overlooked. We will do an in depth review of the product at both Old Navy and Gap next week so that you can better understand our perspective. Again this name receives an 8 out of 10 . GET INTO THE GAP!!!!!!!!!!!