The Real Deal on Wall Street: JC Penney Mania has Swept Wall Street

There has been one constant this week on Wall Street, and that is the outbreak of JC Penney fever. Earnings season stories have changed daily. The Federal Reserve meeting came and went but not before Ben Bernanke dropped a bomb on the savings accounts and CDs of baby boomers and seniors. Even the Republican race for the presidency had new twists and turns from Monday to Friday. But, amidst all of the typical hoopla on the Street stood ole JC Penney, creepily resembling its stoic presence at the end of a local mall.

• Monday: Analyst and investor meeting previewed by newspapers.

• Tuesday: Coverage picked up throughout media land.

• Wednesday: Ron Johnson (Ron John to us cool kids) laid out a fundamental overhaul of the store experience to be orchestrated the next few years.

• Thursday: Saving the best for last, Ron John showed that he was dealt pocket aces on Monday by unveiling a very, very ambitious forward earnings outlook.

• Friday: Climax gone, but stories will be replayed in the weekend papers.

I tuned into almost every Ron John television interview to get a feel for him outside of watching a stage presentation to clubby Wall Street folk (see those heels Martha Stewart wore for her presentation? No way were they from the JC Penney shoe section). Understanding who a CEO is at the core is vital to thinking about how he/she will lead others that are responsible for the granular work of overhauling a brand or keeping sales momentum alive. I like the guy, has a strong and well detailed vision for JC Penney that if pulled off successfully, will be one of the greatest turnaround stories since his former employer, Apple. Mickey Drexler from his Gap days will have nothing on Ron John’s revival of JC Penney. Johnson’s actions will be bringing positive fundamental change to a mostly irrelevant department store and a sense of fear to Macy’s and Kohl’s (Macy’s has done a fine job streamlining its business, but the fact is many of its stores resemble the same shopping experience as 15 years ago).

To buy or not to buy a stock in a company that is trading on a rich valuation (growth stock land) despite still being a stoic department store, at least for the next year, is the Real Deal question of the day. The Intelligent Investor inside of me doesn’t lend itself to being a raging bull on JC Penney. Change is very welcome and long overdue for JC Penney (what was the prior dude doing??!), but change for any retailer takes time to develop and there will be bumps in the road to resurgence. Moreover, JC Penney’s 2012 guidance implies that it will be able to unwind 30 plus years of consumer perception that the shopping experience is drab and dreary, and that is going to be a challenge even for the supremely talented Ron John and his new team.