J.C. Penney Posts Worse-Than-Expected Sales--2nd Update
May 13 2016 - 11:56AM
Dow Jones News
By Anne Steele
J.C. Penney Co. on Friday reported an unexpected decline in
revenue in the first quarter of the year, unable to avoid a slump
in sales that has battered the industry.
"The first quarter was clearly challenging from a sales
perspective," said Chief Executive Marvin Ellison, noting that "our
business was not immune to the issues facing other retailers."
On Wednesday, Macy's Inc. set off fresh fears about the health
of the U.S. retail sector as the country's largest department-store
chain reported its worst quarterly sales since the recession. After
that, Nordstrom Inc. cut its financial projections for the year
following worst-than-anticipated results for the first-quarter, and
said it needed bigger discounts to clear inventory. Kohl's Corp.,
meanwhile, posted a 87% drop in profit in the latest quarter and a
surprise decline in sales.
In all for the quarter, Penney's loss narrowed to $68 million,
or 22 cents a share, from $150 million, or 49 cents a share, a year
earlier. On an adjusted basis, the loss was 32 cents. Analysts
polled by Thomson Reuters had expected an adjusted loss of 38 cents
a share.
Sales slipped 1.6% to $2.81 billion, below analysts' forecast
for a rise to $2.92 billion. Sales at existing stores fell 0.4%.
Still, Penney backed its same stores sales guidance for growth of
3% to 4% this year, citing "the positive nature of our recent sales
trends," strength in its Sephora business and accelerated appliance
rollout.
Gross margin edged down to 36.2% from 36.4% a year earlier, hurt
by additional markdowns due to unseasonable weather. Penney also
lowered its gross margin guidance for the year to a 10 to 30
basis-point increase from a previous forecast of 40 to 60 basis
points, on the rollout of appliances and the rapid growth of its
online business.
Penney said its men's line, footwear and handbags, and Sephora
were among its top-performing divisions.
Earlier this week, Penney said it topped its own goal for a
measure of profit during the quarter and that it would begin
selling appliances online and in more stores as it reintroduces
them to its business after more than 30 years on the sidelines. The
company said it exceeded its quarterly estimate for earnings before
interest, taxes, depreciation and amortization and is on track to
achieve its full-year guidance of $1 billion.
That helped the stock recover from a 7.5% decline last Friday on
worries ahead of the quarterly report. Media reports said then that
the retailer may have sharply cut costs the past several weeks.
On Friday, Penney said it trimmed overhead expenses by 9.6% to
$872 million during the quarter, which ended April 30, mostly owing
to lower controllable costs and corporate overhead, reduced
advertising spend and improved private label credit card
income.
Shares rose 2.2% to $7.97 in midday trading, though they are
still down 14% this month.
Write to Anne Steele at Anne.Steele@wsj.com
(END) Dow Jones Newswires
May 13, 2016 11:41 ET (15:41 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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