NEW YORK (TheStreet) -- J. C. Penney CEO Ron Johnson comes off as a likeable guy. All it takes is a quick glance at the presentation he gave investors in January to figure that out. Near the beginning of his speech, Johnson tells the story of going to Steve Jobs's house to inform him he would be leaving Apple to take a new gig. When Johnson told him he was headed to J. C. Penney, Jobs asked him -- paraphrasing here -- if he was crazy.
Johnson made a connection between Target, Apple and J. C. Penney. Follow this logic: According to Johnson, when he left Target for Apple, people thought he was nuts because Target was doing great and Apple not so much. And now, yet again, he chose to leave a company at the top of its game for one facing considerable headwinds.
Johnson pointed out, however, that it was not quite the same situation. J. C. Penney is in better shape today than Apple was when he moved to Cupertino. Johnson further made the incredibly optimistic leap that, on his watch, J. C. Penney would go on the same trajectory as Apple did between 2000 and 2011.
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If we use stock price as a gauge, we can expect JCP to appreciate by approximately 1,600%. Using Tuesday's closing price of $35.67, that type of pop would put JCP at about $606 a share come 2023. I realize the unfair lunacy of this projection, but Johnson appeared to be quite serious when he set this expectation for himself.
J. C. Penney Will Not Save Brick-and-Mortar Retail
In retail, most companies lack the three things needed to survive in a world defined by on-demand, instant gratification and social media:
A seamless ecosystem
High-end or exclusive products
A unique or special in-store or online experience
As a brick-and-mortar and online retailer, Apple scores high on all three counts. On exclusivity it lacks just a little, but it compensates for this elsewhere. You can buy Apple products from various sources; however, for most of us, picking up an iPad at Target is little more than an impulse buy. That's why they're there. To drive unplanned purchases and serve those not in close proximity to an Apple retail store.
When we set out to buy an Apple product, we do it at the Apple Store. Why? Because it's the cool thing to do, plus we desire the experience Steve Jobs and Ron Johnson created.
J. C. Penney does not score high on any of these three points. And there's really no chance it ever will. A flea market has a better chance at survival than a department store not located in the heart of world-class cities such as New York and London.
If you're not Apple, a luxury retailer like Coach or a high-end outpost with some sustainable level of social cachet such as Nordstrom or Lululemon, you will need to disrupt retail like Pandora disrupted radio or die a slow and painful death. Or, you'll need to disrupt e-commerce and pervade people's lives like Amazon has.
The Amazon Lifestyle
Rumor has it Jeff Bezos will follow up Kindle Fire with an Amazon-branded smartphone. Talk about an ecosystem.
It's great being Amazon. It's not like you're trying to make life hard for other tablet makers; it's just an unintended consequence. Amazon triggers a massive reorganization of Android tablet market share and it's merely collateral damage.
Expect the same dynamic to take shape in the smartphone market.
Amazon has an ecosystem that, while different, is every bit as powerful as Apple's. And it provides a high-quality experience to make up for the fact it does not sell anything that's exclusive and little that's high-end.
Amazon found and continues to find myriad ways to invade your life.
I am an Amazon Prime addict and, in the last several weeks, became a Subscribe & Save devotee. Not to get too personal here, but, as of now, on a regular basis Amazon sends me sardines, three different kinds of energy bars, Metamucil, fish oil capsules, a container of powdered energy drink and two items I am too embarrassed to buy in person or mention here (yes, more embarrassing than Metamucil). I own two Kindle Fires, on which my family and I buy books, periodicals and apps consistently. I stream Amazon Instant Video via my Roku player.
I'm sorry, but J. C. Penney is never going to be like a family member to me. In fact, the thought of setting foot in such a soulless and sterile environment makes Christmas at the in-laws sound like an excellent alternative.
For J. C. Penney to even have a chance at growing its business from here, Ron Johnson needs to revolutionize the department store like he did retail at Apple. Unfortunately for JCP longs, he faces insurmountable obstacles.
He has no ecosystem to speak of. His products are a dime a dozen. There's nothing special about the department store experience, particularly when it comes by way of the shopping mall or strip plaza. And, maybe more importantly, he doesn't have Steve Jobs telling him what to do anymore.
JCP reports earnings May 15. If you're long and the stock pops get out while you can. You probably should have taken profits when JCP hit its highs back in February.
In any event, if you're a long-term investor, JCP is a long-shot speculative play with enough cash on hand to sustain a dividend, at best; at worst, it's dead money.
AMZN, meanwhile, appears set to challenge $250 and then $300 before the year is out.