J. C. Penney Company Inc.
) once again failed to meet expectations as the company reported
consecutive sluggish results, dashing hopes of a recovery, at
least for the near term.
The retailer of apparel and footwear, accessories, fashion
jewelry, beauty products and home furnishing, posted
third-quarter adjusted loss of 93 cents a share compared with
earnings of 18 cents in the year-ago quarter. The Zacks Consensus
Estimate for the quarter was of a loss of 8 cents.
On a reported basis, including one-time items, quarterly loss
came in at 56 cents compared with a loss of 67 cents in the
Quarterly sales of $2,927 million plunged 26.6% from the
prior-year quarter, and fell short of the Zacks Consensus
Estimate of $3,290 million. Internet sales via jcp.com plummeted
37.3% to $214 million in the quarter.
Comparable-store sales declined 26.1% during the quarter
compared with a decrease of 1.6% in the prior-year period. We
believe that the company needs to be more vocal regarding its
pricing mechanism and better align its marketing efforts to
Gross profit slipped 36.1% to $952 million, whereas gross
profit margin contracted 490 basis points to 32.5%, signifying
lower sales and increased markdowns to clear inventory. The
company posted adjusted operating loss of $277 million compared
with an operating income of $116 million in the year-ago period.
During the quarter, the company opened 7 new jcpenney stores,
which includes 4 new stores and 3 relocations. Moreover, the
company opened 38 Sephora stores inside jcpenney stores, bringing
in the total store counts to 386. Brand-wise, the company also
opened shops under the jcp, Liz Claiborne, Levi's, The Original
Arizona Jean Co. and Izod brands.
Other Financial Details
J. C. Penney ended the quarter with cash and cash equivalents
of $525 million, long-term debt of $2,868 million and
shareholders' equity of $3,502 million. The company incurred
capital expenditures of $341 million and produced negative free
cash flow of $389 million.
J. C. Penney is in a transitory phase, trying to remould
itself from the way it had operated before Ron Johnson took
charge. In order to uplift itself, J. C. Penney announced an
array of measures, which include new pricing strategy, fresh
logo, strategic merchandise initiatives, cost reduction and
enhancement of customers' shopping experience, which in turn will
augment store sales productivity, and lead to margin expansion
and bottom-line growth.
The company aims to reduce costs by over $900 million by the
end of fiscal 2012, given the operational efficiencies and
sustained efforts to contain costs effectively.
J. C. Penney, which competes with
), currently operates approximately 1,100 department stores in
the United States and Puerto Rico.
Currently, we have a long-term Underperform recommendation on
the stock. However, J. C. Penney holds a Zacks #3 Rank that
translates into a short-term Hold rating.
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