JCP/Albo – May it rest in peace. 

Still, $1.5Bn for 1,000 stores is $1.5M/store but then there's $5Bn of debt against $12Bn of low-margin sales that have yielded about $60M in Operating Income TOTAL over the last 3 years (net income was a $1.2Bn loss but there were write-downs and such).  More concerning is that they dropped $600M in cash over the past 3 years and only have $157M in the bank but also $206M of short-term investments which would be good news but they started the year with $762M so what happened there.  Also, it looks to me like they factored their receivables to get cash as net receivables has gone to zero (impossible in normal operations).  If I were making an offer to a store like this, I'd walk away and let them sweat it out because I'd know they have more pressure daily to sell and I also know no one is going to be stupid enough to buy them while I'm pressuring them to lower their price. 

M, by comparison, has $1.2Bn in the bank and $8Bn in debt and has dropped $1Bn over 3 years in cash flow but $25Bn in sales and operating income of $6.2Bn (net income $3.1Bn) makes them a steal at $6.7Bn (same 1,000 stores).  Consider whether you'd rather own the JC Penny's stores in your area or the Macy's and Bloomingdales?   Also, M owns 447 of their stores outright and one of them is an entire block in midtown Manhattan, probably worth $3Bn by itself.  Sachs 5th avenue borrowed $3.7Bn against it's 5th Ave store so $3Bn is probably conservative for Herald Square.

In the LTP, we only have 10 short M 2019 $28 puts we sold for $5.60 back in Jan and they are now $8.83 so let's:

• Roll 10 short 2019 $28 puts ($8.83) to 15 short $23 puts ($7,500).
• Buy 40 2019 $23 calls for $3.20 ($12,800) 
• Sell 40 2019 $28 calls for $1.75 ($7,000)

That's net $5,800 on the new spread less $5,600 we originally collected on the puts plus $1,330 we spent on the roll is net net $1,530 on $20,000 worth of Macy's spreads!  If M gets back to $28 in two years, we make $18,470 (1,200%) and, if not, we are THRILLED to roll to a lower 2021 strike and sell more puts.  

Even if that doesn't work and we roll it out again to 2023 and we end up in for $5,000 and THEN we hit it – it's still a nice 300% return over 6 years!  As long as they don't go BK, this is a great play.

DRYS/StJ – What a scam!