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Penney’s Q1 sales disappoint; cuts profit outlook

J.C. Penney reported sales that missed analysts’ forecasts, blaming cooler than normal temperatures that took a bite out of demand for spring clothing.

Penney's net loss narrowed to $78 million, or 25 cents per share, in the period ended May 5, from $187 million, or 60 cents a share, in the year-ago quarter. Excluding one-time items, the retailer lost 22 cents a share, one cent better than the 23-cent loss analysts were expecting.

Revenue fell 4.3% to $2.58 billion, which was less than the $2.61 billion analysts had forecast. (The decline in was primarily the result of the 141 stores that closed in the second and third quarters of fiscal 2017, according to Penney.) Same-store sales inched up 0.2%, less than the 2.1% increase the Street expected.

“During the first quarter, we achieved a positive sales comp of 0.2 %, which was impacted in large part by a very late start to Spring where we experienced cooler than normal temperatures in April,” stated Marvin Ellison. CEO. “Although our overall top line sales results came in below our expectations for the quarter, we were encouraged by the strong positive comp performance throughout February and March, as well as the last two weeks of April, when temperatures began to normalize.”

Jewelry, Sephora, men's and salon were the company's top performing divisions and categories during the quarter. Geographically, the Gulf Coast and Southeast were the best performing regions of the country.

Neil Saunders, managing director of GlobalData Retail, said that the “poor assortment” of apparel at Penney had more to do with the retailer’s sales miss than the weather.

“Despite some changes to clothing, we still believe that ranges lack conviction and coherence, especially in womenswear,” he said. “In short, the offer is just not all that compelling. Without an inspiring apparel offer, JCP found it harder to pull in customer traffic and extract dollars from those consumers willing and able to treat themselves. While other retailers, including Macy's, made gains here, JCP floundered.” For more commentary, click here.

Penney management remained optimistic.

“Overall, we believe that our strategies are beginning to take hold, as we are seeing improvement in a number of areas,” Ellison said. “The strength in sales performance early in the quarter, our investments in enhancing our apparel categories, continued strength in our beauty and home refresh initiatives and a focus on taking market share from ailing retailers all give us confidence in our annual comp sales guidance of flat to up 2%.”

Still, Penney adjusted its full-year earnings-per-share outlook to anywhere from a loss of 7 cents to earnings of 13 cents. That compares with prior guidance of earnings between 5 to 25 cents a share. Wall Street analysts surveyed by Bloomberg were expecting full year earnings-per-share of $0.18.
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