FILE PHOTO: A J.C. Penney employee helps a customer with her purchase at the J.C. Penney department store in North Riverside, Illinois, U.S., November 17, 2017. REUTERS/Kamil Krzaczynski/File Photo
November 15, 2018
By Aishwarya Venugopal
(Reuters) – J.C. Penney Co Inc <JCP.N> withdrew its annual earnings forecast on Thursday, adding to nerves about the future of another one of America’s best known retail names ahead of the crucial holiday selling season.
After having fallen from $80 at the turn of the century, shares in the chain of department stores were down nearly 10 percent on Thursday, taking them closer to “penny stock” territory, or a value under $1.
J.C. Penney has for years struggled to excite consumers with its mid-priced range of apparel as style-conscious millennials flock to fast-fashion brands or online stores.
The Plano, Texas-based company has also changed strategy several times, alienating middle-aged and older women — a group it considers a core demographic — as it chased after younger shoppers.
During the third quarter ended Nov. 3, J.C. Penney used heavy discounts to clear excess inventory of out-of-style clothing, it said, dragging sales lower.
Sales at J.C. Penney stores open for over a year fell 5.4 percent, way more than Wall Street analysts’ average expectation of a 0.6 percent decline, according to IBES data from Refinitiv.
The figure was “a really bad number for this environment and is very concerning,” said Ken Perkins, founder of research firm Retail Metrics.
A long line of American retailers, including most recently Sears, have gone bankrupt during the past few years in the face of brutal competition from Amazon and other online stores.
Much like out-of-business Sears, J.C. Penney has reported losses for many years and axed hundreds of jobs.
“Are they in an immediate danger of filing for bankruptcy? I don’t see that, but if they don’t ride ship and start to generate positive comp store sales and positive traffic, it does call it into question,” Perkins said.
J.C. Penney withdrew its annual earnings forecast, saying it needed to give newly appointed chief executive officer Jill Soltau and its interim chief financial officer more time to assess the business.
“While restoring JCPenney to sustained profitable growth will be a lengthy process, I understand the need for quick action,” Soltau said.
Soltau, a former Sears and Kohl’s <KSS.N> executive, was hired in October to replace Marvin Ellison, who left abruptly to head home improvement chain Lowe’s <LOW.N>.
J.C. Penney now expects comparable-store sales for fiscal 2018 to fall in the low single digits, compacted with an earlier projection of sales being unchanged year-over-year.
Its quarterly net loss widened to $151 million, from $125 million a year earlier. Excluding one-time items, J.C. Penney lost 52 cents per share.
Revenue dipped 5.3 percent to $2.73 billion and missed expectations.
(Reporting by Aishwarya Venugopal in Bengaluru; Editing by Sai Sachin Ravikumar)
