Penney shares dip on battle vs. activist

By Ben Rooney, staff reporter


NEW YORK (CNNMoney.com) -- Shares of department store operator JC Penney eased Monday after the company adopted a plan to combat an activist shareholder.

Shares of Plano, Texas-based Penney (JCP, Fortune 500) slipped more than 2% to $33.11 in late trading after falling as low as $32.47 earlier in the session.

Pershing Square, a large hedge fund run by activist investor Bill Ackman, disclosed in regulatory filings last week that it owns 16.5% of Penney's common stock. In a separate filing, Vornado Realty Trust, a Maryland real estate investment trust, said it holds a 9.9% stake in the retailer's common stock.

The adoption of the plan,also known as a poison pill, came "in light of recent rapid accumulations of a significant percentage of the company's outstanding common stock," Penney said in a regulatory filing.

The plan kicks in if any person or group buys more than 10% of the company's common stock, or tries to expand existing stakes beyond 10%, according to the filing. It has a life span of one year.

Despite the dip on Monday, shares of Penney have been on a tear since falling to a low of $19.50 in late August. The stock is up nearly 24% so far this year.

The disclosures raised speculation that Ackman, who was involved in a drawn-out proxy battle with Target (TGT, Fortune 500) last year and forced the sale of fast-food giant Wendy's, will shake things up at Penney.

Analysts at Barclay's Capital said last week that they remain optimistic about Penney's sales growth, but downgraded the stock to "equal weight" from "overweight" on unspecified distractions ahead of the key holiday shopping period.

"As we are heading into the important holiday selling season, where the company earns almost two-thirds of its annual profits, we are concerned that management may be distracted and miss an opportunity for sales and profit gains," Barclays analysts wrote.

Same-store sales, an important gauge of a retailer's health, increased 5.1% for the five-week period ended Oct. 2, the company said, topping its own expectations.

Morningstar analysts said in a research report that they do not expect Pershing Square to make a significant impact on J.C. Penney's operations, though they acknowledged that "financial engineering" remains a possibility.

"We do think Pershing will shake things up," the Morningstar analysts said. "At a minimum, we believe real estate will be one of the ways Pershing will attempt to increase the value of its stake." To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 16,408.54 -16.31 -0.10%
Nasdaq 4,095.52 9.29 0.23%
S&P 500 1,864.85 2.54 0.14%
Treasuries 2.72 0.08 3.19%
Data as of 4:33am ET
Company Price Change % Change
Bank of America Corp... 16.15 0.00 0.00%
Facebook Inc 58.94 0.00 0.00%
General Electric Co 26.56 0.00 0.00%
Cisco Systems Inc 23.19 -0.02 -0.09%
Micron Technology In... 23.91 0.00 0.00%
Data as of Apr 17
Sponsors

Sections

Spencer has been a supporting member of the "Good Morning America" cast for the past three years. More

Obamacare sign ups hit 8 million, though final enrollment remains to be seen. More

Office for iPad move is a symbolic victory for Nadella's Microsoft, but the company is still weighed down by many of the same old issues. More

Schwinn, Trek and Cannondale are all iconic American bicycle brands. But none of them are made in the United States. More

As Detroit moves closer to reaching a bankruptcy deal, retired civilian workers are poised to be left worse off than firemen and police officers. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.