Tags: Penney | Shares | Disappointing | Sales

Penney's Shares Tumble as Sales Gain Falls Short

Tuesday, 04 February 2014 05:15 PM

Shares of J.C. Penney Co. fell the most in more than four months after posting fourth-quarter same-store sales that rose less than analysts estimated.

The shares fell 11 percent to $5.08 at Tuesday's close in New York, the biggest decline since Sept. 27. J.C. Penney has slid 74 percent in the past 12 months.

Sales at locations open at least a year rose 2 percent in the fiscal fourth quarter, which runs through January, the Plano, Texas-based company said in a statement. The average of 12 analysts’ projections compiled by Bloomberg was for a 4.1 percent gain. Same-store sales climbed 3.1 percent in the nine weeks through November and December, J.C. Penney said.

Chief Executive Officer Mike Ullman has halted the drop in J.C. Penney’s sales by reviving popular private-label brands and bringing back sales events that former CEO Ron Johnson had done away with. The effort resulted in the first same-store sales gain since the quarter ended in July 2011. Even so, the modest increase highlights the hard work that remains, said Mary Ross Gilbert, an analyst at Imperial Capital LLC in Los Angeles.

“For comparable sales to be up 2 percent just underscores how challenged J.C. Penney is,” Ross Gilbert, who has the equivalent of a sell rating on the shares, said in a telephone interview. “In this competitive environment, it shows how tough it is to regain lost share.”

J.C. Penney’s same-store sales plunged 32 percent in the fourth quarter a year earlier.

Liquidity Forecast

J.C. Penney said it ended the quarter with more than $2 billion in liquidity, meeting its forecast. The company plans to announce full fourth-quarter results on Feb. 26.

The department-store chain’s sales gain came in a holiday season in which retailers ramped up profit-eating discounts to lure shoppers into stores. Chains from home-goods merchant Pier One Imports Inc. to discounter Family Dollar Stores Inc. and luxury lingerie seller L Brands Inc. have cut profit forecasts because of the discounts and lower-than-expected sales. Wal-Mart Stores Inc. said last week that fourth-quarter profit would be at or below the low end of its projection.

J.C. Penney shares tumbled 10 percent on Jan. 8 when the company repeated its fourth-quarter outlook and said it was pleased with its holiday performance without providing sales data for December as it had for previous months. Beauty products, activewear, sweaters, dresses and boots were among the strongest categories during the holidays, J.C. Penney said today.

Store Closings

Also last month, the company said it planned to close 33 stores and eliminate about 2,000 jobs to help save $65 million a year. The closings, which will be completed by early May, represent about 3 percent of J.C. Penney’s stores, and the job cuts would be about 2 percent of its workforce.

Losses stretching back to 2011 have sapped J.C. Penney’s cash and spurred Ullman to raise capital to replenish the retailer’s coffers. Since returning as CEO in April, he has drawn $850 million from a revolving credit facility, arranged a loan commitment from Goldman Sachs Group Inc. that provided $2.25 billion in cash and sold 84 million shares, generating about $785 million after fees.

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Shares of J.C. Penney Co. fell the most in more than four months after posting fourth-quarter same-store sales that rose less than analysts estimated.
Tuesday, 04 February 2014 05:15 PM
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