J.C. Penney slashes full-year profits forecast, net loss widens
J.C. Penney Co Inc shares surged more than 19 percent on Friday after the retailer reported much better-than-expected same-store sales and said it will compete fiercely on price while keeping inventory lean during the crucial holiday quarter.
U.S. department stores have worked hard this year to rein in inventory and build better delivery services. They have also cut prices to boost declining foot traffic as shoppers turn to discount and online retailers. “You’re going to see in our new holiday campaign a huge emphasis on value and price,” J.C. Penney Chief Executive Marvin Ellison said on a call to discuss earnings, noting that where the retailer did not have a centralized pricing strategy just over a year ago, it would now be aggressive on pricing online and in stores. Ellison said the company had zeroed in on promotional strategies expected to improve both traffic and margins, having tested them out during the third quarter. Third-quarter same-store sales far exceeded analyst expectations and rose by more than twice what the company itself had forecast just one day before the end of the period. Chief Financial Officer Jeffrey Davis attributed that wide difference to unexpected sales in the last few days of the quarter. The retailer said comparable sales rose 1.7 percent, compared with the 0.6 percent to 0.8 percent it had forecast in October. Analysts on average had expected comparable sales to increase 0.7 percent, according to Thomson Reuters I/B/E/S. J.C. Penney shares, which lost about a quarter of their value when the company made the sales forecast, were last up 15 percent in morning trading. The company also slashed its full-year sales and profit expectations in October, saying it sold stagnant apparel inventory at heavy discounts amid an overhaul of its women’s section. Ellison said on Friday that J.C. Penney will not need to liquidate inventory again in the fourth quarter. “We took aggressive actions to clear slow-moving inventory, primarily allowing for an improved apparel assortment heading into the holiday season,” he said. Rivals Macy’s Inc, Kohl’s Corp and Nordstrom Inc said on Thursday that they were also entering the holiday season with tight inventory. J.C. Penney’s net loss widened to $128 million, or 41 cents per share, in the quarter ended Oct. 28, from $67 million, or 22 cents per share, a year earlier, partly because of the heavy discounting. Excluding items, the company lost 33 cents per share, less than the 40 cent to 45 cent loss it had estimated. Analysts expected a 43 cent loss. Net sales fell about 2 percent to $2.81 billion but beat the average analyst estimate of $2.77 billion.