PLANO, Texas – J.C. Penney Co. narrowed its third-quarter loss but sales slowed as warm weather curbed demand for fall merchandise.
The department store chain said late Wednesday that revenue from its stores open at least a year, a key retail metric, was flat, following gains in the three prior quarters. Still, Penney’s executives said they’re pleased with November sales and they are counting on that measure to rise 2 to 4 per cent in the critical holiday quarter.
The results offer some encouraging signs for the Plano, Texas-based retailer as it tries to recover from a disastrous attempt to reinvent itself. But it still faces difficulties as it heads into the holiday shopping season: Traffic is down and Penney needs to bring in more shoppers to boost sales.
Amid this challenge, the company’s leadership is changing. Last month Penney named Marvin Ellison as its next president and CEO. Ellison, a former executive with Home Depot, started earlier this month and will take over CEO Mike Ullman’s job in August.
Ullman has been trying to win back shoppers by restoring discounts and basic merchandise. Ellison is tasked with reviving the business.
Ullman came out of retirement last year to stabilize the business after Ron Johnson was ousted. Johnson had tried unsuccessfully to reinvent the chain by getting rid of most sales and some basic merchandise. That led to billions in losses of profit and sales and it has been a tough recovery.
Penney’s strategy now is to improve productivity, expand e-commerce and spruce up some departments that it said would boost sales by $2.55 billion over the next three years.
Penney sees the opportunity for an additional $1 billion in sales from continued market-share growth. That would bring the chain’s annual revenue to $14.5 billion by fiscal 2017. That’s still well below the $17.23 billion it generated before sales went into a freefall under Johnson.
In the most recent quarter, Penney lost $188 million, or 62 cents per share. It lost 77 cents per share on an adjusted basis, topping Wall Street expectations. The average estimate of analysts surveyed by Zacks Investment Research was for a loss of 83 cents per share.
Last year, the company lost $489 million, or $1.94 per share, for its fiscal third quarter, or $1.81 per share on an adjusted basis.
J.C. Penney’s revenue slipped slightly to $2.76 billion from $2.78 billion. It missed missing Street forecasts; analysts expected $2.82 billion, according to Zacks.
The company said Wednesday that sales suffered because it had 30 per cent less summer merchandise on clearance compared with last year, when it discontinued 14 brands that Johnson had introduced. Shoppers were looking for light-weight clothing because of the warm weather. But the lack of clearance merchandise also bolstered profit margins.
Macy’s also cut its profit outlook for the year on Wednesday because of a sales shortfall.
J.C. Penney shares dropped 48 cents, or 6.2 per cent, to $7.28 in extended trading. They closed at $7.76 Wednesday, down about 7 per cent in the past 12 months.
Elements of this story were generated by Automated Insights using data from Zacks Investment Research. JCP stock research report from Zacks.
Keywords:J.C. Penney,Earnings Report,Priority Earnings