J.C. Penney narrows loss but sales fall; opening in-store resale shops
J.C. Penney on Thursday reported mixed results for its second quarter, cutting its loss by more than half even as its sales continued to erode.
The beleaguered department store retailer also announced that it is partnering with online consignment retailer thredUP, with 30 Penney stores to offer a selection of secondhand women’s clothing and handbags. The thredUP assortment at Penney will be featured in a 500-sq.-ft.-to-1,000-sq.-ft. presentation, with items refreshed weekly. (News of the partnership the day after Macy’s announced it is also partnering with thredUP.)
“With the rise of online resale markets, there’s no doubt that demand for great value on quality brands is at an all-time high,” Michelle Wlazlo, executive VP and chief merchant for Penney. “There’s an emotional thrill that comes with finding one-of-a-kind secondhand product for much less. While there are more secondhand shoppers than ever before, we’ll continue to test and evaluate how this resonates with customers. We’re excited about the prospect of creating a new in-store experience that makes high-end brands attainable.”
In other new initiatives, Penney said during its quarterly call with analysts that it will introduce new visual merchandising elements this fall in the women’s fashion department to provide an enhanced shopping experience. It also will test a new fitting room concept, The Styling Room, which features digital components and personal stylists.
Penney reported a net loss of $48 million, or ($0.15) per share, for the quarter ended August 3, compared to a net loss of $101 million, or ($0.32) per share in the same period last year. Excluding one-time items, Penney lost $0.18 per share, compared with analysts’ forecasts of a loss of $0.31 cents.
Total sales declined 9.2% to $2.51 billion, missing expectations. Same-store sales decreased 9%. Excluding the impact of the company’s exit from major appliance and in-store furniture categories, comparable sales decreased 6%.
Jill Soltau, who took the reins as Penney CEO some 10 months ago, has been working to fashion a turnaround at the company, which has struggled to find its place in a transformed marketplace and burdened with about $4 million in debt. Penney recently received notice that it is at risk of being delisted from the New York Stock Exchange.
In a statement, Soltau expressed confidence that the chain in on the right track, but that it still has a ways to go, with no quick fixes.
“I am pleased with the results we delivered this quarter and the progress we are making against our plan,” said Soltau. “While we still have work to do on our topline, I strongly believe that growing sales in an unprofitable way is simply not an option. The only way I know how to reconstruct a business, is through a holistic approach across all the key tenets of strategic, purposeful and effective retailing. Notably this quarter, the meaningful improvement we delivered in cost of goods sold was driven by lower permanent markdowns, improved shrink results, increased store and online selling margins and the exit of major appliance and in-store furniture categories.’
Soltau also noted that Penney reduced inventory by 12.5% amid efforts to improve inventory management and productivity. Penney ended the quarter with $175 million in cash and $1.7 billion in liquidity.
In comments, industry analyst Neil Saunders, managing director, GlobalData Retail, said he is impressed with some of the steps Jill Soltau – “who inherited this mess” – has taken so far. But he raised doubt on whether they can work quickly enough or if they will deliver to the degree required to save the company.
“Most of the actions to date have been course corrections design to fix problems within the business,” Saunders said. All these things are necessary, and the company deserves credit for moving at pace to address them…they do not solve the critical issue of making JCP relevant and meaningful to consumers. Only that can drive the topline growth that is so critical in moving the company back into the black.” For more commentary, click here.