JC Penney Finds New Ways to Disappoint Investors

J.C. Penney Co. Inc. (NYSE: JCP) reported first-quarter fiscal 2019 results before markets opened Tuesday. The venerable retailer reported an adjusted net loss per share of $0.46 and $2.56 billion in revenues. In the same period a year ago, it reported a net loss per share of $0.22 on revenue of $2.67 billion. First-quarter results also compare to consensus estimates for a net loss per share of $0.38 and $2.56 billion in revenue.

Excluding credit and other income of $116 million, net sales for the quarter totaled $2.44 billion.

Same-store sales tumbled by 5.5% in the quarter and 0.1% for the full year. Analysts were looking for a first-quarter drop of around 4.2%. The company attributed 20 basis points of the drop in same-store sales to the decision to end major appliance and furniture sales.

CEO Jill Soltau commented:

I am pleased with the strides we’ve made in setting key objectives, building our senior leadership team, executing significant changes in our assortment, such as eliminating major appliances and mobilizing the entire organization around our priorities.

[nativounit]

Okay, setting objectives and all the rest of these accomplishments are important. But if the boat is sinking, discussing what’s for dinner tomorrow is not the best use of time. Soltau came on board as CEO last October and, granted that six months is not a lot of time to turn around the sinking ship that is J.C. Penney, she should have more to brag about than ditching appliances and furniture and reducing inventory by 16%.

Soltau also said:

My commitment is that we will make sound, strategic decisions backed by data and will always be rooted in delivering on our customers’ wants and expectations. Our current efforts are focused around two parallel paths. First, we are continuing to map out a comprehensive long-term strategy for JCPenney, which we look forward to sharing in the coming months. Second, we are working quickly to build a talented and accomplished team of retail experts. JCPenney is an American retail icon that is very important to all of our stakeholders, and I am encouraged by the early signs I am seeing in our business as we work to realize the potential that lies ahead.

What does all that add up to? In an outlook statement, the company said only that it expects to post positive free cash flow in the 2019 fiscal year. Even if J.C. Penney achieves that goal, what does it prove? Year-over-year cost of goods sold is up, SG&A is up and operating income is down 3.8%.

Analysts expect a net loss of $0.28 per share in the second quarter and a full-year net loss of $0.77. Those numbers are sure to be revised downward. Second-quarter revenues are tabbed at $2.75 billion, and full-year sales are expected to total $11.77 billion.

The stock traded down nearly 10% in Tuesday’s premarket session at $1.04, after closing at $1.15 on Monday. The stock’s 52-week range is $0.92 to $3.16, and the 12-month price target is $1.42.

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