We have been following J.C. Penney Company Inc. (JCP) off and on since 2011 because Bill Ackman had taken a position in JCP and because Ackman was influential in recruiting Ron Johnson away from Apple Retail (AAPL) in order to become JCP’s new CEO to succeed Myron Ullman, who was JCP’s CEO from 2004-2011. Although we demurred from taking a stake in JCP, we were intrigued by the idea of JCP’s willingness to “shake things up” as its EPS peaked in FY 2008 and declined by 68% during the following three years. One particular piece of financial information that stood out to us was from 2003 to 2008, JCP’s revenue only increased by 13% but its net income increased by 206% as its revenues grew at an incremental rate of 2.5% annually during this time period while its expenses were flat during this period. This trend reversed itself from 2009-2011, as expenses steadily increased while its revenues steadily declined.

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