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Penney Reports Sales Drop, Adds to Department Store Gloom

Image: Penney Reports Sales Drop, Adds to Department Store Gloom

Friday, 13 May 2016 08:29 AM

J.C. Penney Co. Inc. joined Macy's Inc. and Kohl's Corp. in reporting a drop in total sales in a quarter marked by weak demand for apparel - at their stores, at least.

The department store operator also reported a surprise drop in sales at stores open at least a year, the first fall in six quarters for a company that has been a bright spot in a sector struggling with a shift in spending patterns.

J.C. Penney's shares fell as much as 13 percent in premarket trading, but recovered most of that after the market opened as investors took heart from the fact the 0.4 percent fall in same-store sales was not as steep as those suffered by its rivals.

Shoppers are increasingly spending more on purchases such as electronics, homes, travel and cars than on apparel, a major source of revenue for department stores.

Amazon.com Inc.'s ever-growing power in retailing is also bad news for department stores, as is the growth of fast-fashion chains such as Forever 21 and Inditex's Zara.

It's not that consumers aren't spending. U.S. retail sales in April recorded their biggest increase in a year as Americans stepped up purchases of automobiles and a range of other goods, the Commerce Department reported on Friday.

And sales at clothing stores surged 1.0 percent, the biggest increase since May 2015, the data showed.

Current spending trends are likely to continue in the near term, J.C. Penney's chief financial officer, Ed Record, said on a call with analysts.

Chief Executive Marvin Ellison also cited warmer-than-expected weather in February as a negative factor.

"Our over-reliance on apparel hurt us in times during the first quarter when weather patterns were not conducive to apparel sales," Ellison said.

J.C. Penney's shares were down 1.5 percent at $7.68 in morning trading.


The 0.4 percent fall in sales at J.C. Penney stores open at least a year came as a shock. Analysts polled by research firm Consensus Metrix had expected a rise of 3.3 percent.

Still, Penney outperformed Macy's, Kohl's and Nordstrom Inc. on that measure. Same-store sales at Macy's, the biggest U.S. department store operator, fell 5.6 percent while those at Kohl's dropped 3.9 percent and Nordstrom's slipped 1.7 percent.

J.C. Penney's net loss also narrowed - to $68 million, or 22 cents per share, in the first quarter ended April 30 from $150 million, or 49 cents per share, a year earlier.

Excluding items, the company reported a loss of 32 cents per share. Analysts on average had expected a loss of 38 cents, according to Thomson Reuters I/B/E/S.

But net sales fell 1.6 percent to $2.81 billion, the first drop in five quarters. Sales also missed the average analyst estimate of $2.92 billion.

J.C. Penney cut its forecast for gross margin growth for the year ending January 2017 to 10-30 basis points from 40-60, as online sales increase and it starts to sell low-margin appliances at more stores.

© 2018 Thomson/Reuters. All rights reserved.

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U.S. department store operator J.C. Penney Co Inc joined rivals including Macy's Incand Kohl's Corp in reporting a drop in sales in a quarter marked by a slump in apparel demand.
penney, earnings, loss, sales
Friday, 13 May 2016 08:29 AM
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