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J.C. Penney plummets after loss renews concerns about industry

The company posted $2.96 billion in net sales, compared with an estimate of $2.85 billion

Gulf News

NEW YORK: J.C. Penney is the bearer of more bad news for department-store investors.

On Friday morning, the company followed Macy’s Inc., Kohl’s Corp. and Dillard’s Inc. in reporting declining sales in the second quarter. J.C. Penney also posted a deeper loss than analysts expected — hurt by clearance sales — sending the shares down as much as 17 per cent in early trading.

The results renewed fears that there’s no end in sight for the department-store industry’s drought. J.C. Penney Chief Executive Officer Marvin Ellison is trying to win back customers by expanding the company’s partnership with cosmetic retailer Sephora and bolstering the assortment of high-price items, like appliances. The company is also pushing services like salons that require shoppers to come into stores. But progress has been slow.

The company also is closing about 140 underperforming stores. And the liquidation of inventory in 127 of those locations hurt profit in the period, Ellison said in a statement.

“These events were isolated to the second quarter,” he said, adding that the company expects to “deliver improved results in the back half of the year.”

But investors saw little reason for optimism. The shares tumbled as low as $3.90 in premarket trading after the report was released. That followed a 43 per cent decline this year through Thursday’s close.

Red ink

Same-store sales at J.C. Penney fell 1.3 per cent in the period, which ended July 29. That compared with the 1.2 per cent decline projected by analysts, according to Consensus Metrix. The loss was 9 cents a share in the second quarter, excluding some items. Analysts estimated a 4-cent deficit on average.

Still, overall revenue came in a bit above projections. The company posted $2.96 billion in net sales, compared with an estimate of $2.85 billion.

“While broader retail remains challenged, we are encouraged by the improved performance in our total apparel business, including a significant acceleration in kids’ apparel,” Ellison said.