J.C. Penney posts weak Q3; new CEO needs more time to ‘assess business’

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J.C. Penney posts weak Q3; new CEO needs more time to ‘assess business’

By Marianne Wilson - 11/15/2018
J.C. Penney on Thursday withdrew its annual earning forecast on the heels of a weak third quarter that saw sales tumble 5.8%, missing analysts’ estimates.

In a statement, Penney said it was withdrawing its prior full-year earnings guidance in order to give its new CEO and interim CFO the ability “to effectively assess and address current and go-forward execution of the business.” The retailer also said updated its previous full year comparable store sales guidance, with comp store sales now expected to be down low-single digits.

The retailer reported a net loss of $151 million, or ($0.48) per share, for the period ended Nov. 3, compared to a net loss of $125 million, or ($0.40) per share, in the year-ago period. Adjusted net loss was $164 million, or ($0.52) per share, less than the 56 cents per share loss analysts expected

Total net sales decreased 5.8% to $2.65 billion, missing analysts’ estimates of $2.81 billion. Same-store sales decreased 5.4 %. Jewelry, women’s apparel and men’s were the Company’s top performing divisions during the quarter.

In a statement, Jill Soltau, who took the reins of Penny as CEO in October, said that, in spite of the overall sales results, she was encouraged by the recent underlying trends in such key businesses as women’s apparel, active, special sizes and fine jewelry.

“We are making progress and taking the necessary steps to right-size our inventory positions to better support the brands and categories that are demonstrating profitable sales growth,” she said. “While restoring J.C. Penney to sustained profitable growth will be a lengthy process, I understand the need for quick action. 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. We will act swiftly but thoughtfully as we move the business forward. While these things take time, the results we are reporting today only strengthen our sense of urgency and purpose.”

Neil Saunders, managing director of GlobalData Retail, described Penney’s sales performance — at a time when consumer confidence and spending are at their peak — as “nothing short of atrocious.” In trying to improve the chain, new CEO Soltau is faced with a “monumental task,” he said.

“This isn't so much as running up a down escalator, it's more akin to running up a super-speed down escalator with slippery oil poured all over it,” Saunders said. “The first and most pressing task for Jill Soltau is to get J.C. Penney back to thinking in a customer-centric way. For far too long the company has undertaken random initiatives with seemingly no consideration of who the core customer is or what they want.” For more analysis, click here.

Penney said its inventory at the end of the quarter was $3.22 billion, down 5.4% from the same quarter last year. It ended the quarter with $168 million in cash and cash equivalent, and more than $1.9 billion in liquidity.

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