JC Penney Dangerous Score with Jewelry and Maybe Gold $JCP $GLD

JC Penney (NYSE:JCP) is showing some encouraging signs of a pulse. While Q3 was expected to look ugly, Oct same store sales were up. JCP hasn’t seen up for a long time. The market is excited.

One of the categories doing well has been jewelry. The price of gold is off and it looks like JC Penney has not been caught with olde over priced stock. The question becomes does the value conscious shopper keep buying jewelry when the price of gold goes up? What will happen to the category? Price elasticity will skewer the shopper. Will this negatively impact same store sales in the future.

JC Penney does not compete with Tiffany’s (NYSE:TIF) or other high-end jewelers. But it will need to engage and retain their fleeting customer base. Disappointments will not work.

George Gutowski writes from a caveat emptor perspective.

Mcdonald’s $MCD Global Perspective

Big Mac Japan Version Box

Image via Wikipedia

Mcdonald’s (NYSE:MCD) announces same store US sales did not meet street expectations. But the economy is recovering and jobless rate is dropping. Why does the workforce not spend its money for a Big Mac? Answer maybe the recovery is weaker than announced.

$MCD is a global company. The analysis that equates poor US sales to a drop in overall enterprise value is provincial and blinkered. Investors relying on this logic exclusively will be disappointed. Wall Street talks a good story about global outlook and then fails to apply it in the most fundamental way.

McDonald’s is subject to food/agricultural price inflation. Can they maintain margins in a food inflation cycle? The US$ has dropped so the value of foreign earnings is more important in real terms. If as and when the US$ recovers significantly will these analysts be satisfied with lower foreign earnings but better same store domestic sales.

The analytical thinking is suspect. Now what will executives do to manage street expectations in the light of poor thinking? It appears that the value of foreign expansion has not engaged some of the analysts and investors.

Disclosure: “George Gutowski” writes from a “caveat emptor perspective”. I hold no positions in stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.