J. C. Penney Company Inc
. (
JCP
) continues with its cost cutting efforts with the reduction of 350
jobs at its Plano, Texasheadquarters, marking the completion of the
reorganization of its home office. The move was the part of the
company's much touted transformation plan, aimed to create a leaner
and simplified operating structure.
To combat the competitive pressures from its peers like
Kohl's Corporation
(
KSS
) and
Macy's Inc
(
M
), the company announced its plan to slash costs by $900 million in
the first couple of years of its transformation, resulting in
reduction of expenses below 30% of sales. Moreover, the company
targets expenses to be 27% of sales in the long run.
Specifically speaking, management stated that it will abridge a
significant amount of costs from stores and advertising as well as
from operations at its home office.
The company took a string of strategic measures, including new
pricing strategy, fresh logo, strategic merchandise initiatives,
reduction in costs, enhancement of shopping experience and
customers shopping at their own terms, to become America's favorite
store.
Despite these strategies, the company failed to live up to the
expectation of its Chief Executive Officer, Ron Johnson.
J. C. Penney delivered sluggish first-quarter 2012 results with
a sharp decline in revenue and profitability. The company posted a
quarterly loss of 25 cents a share compared with earnings of 36
cents in the year-ago quarter, while its top-line plunged 20.1% to
$3,152 million.
Adding to shareholders pain, J.C. Penney announced the
suspension of the quarterly dividend to generate savings of $175
million annually in cash to be utilized for funding the
transformation process.
However, this shouldn't come as a complete surprise for the
shareholders as J.C. Penney's COO, Mike Kramer, previously
announced that the company plans to self fund the entire
transformation process.
(Read our full coverage on this earnings report:
J. C. Penney Plunges, Dividend Shelved
).
Currently, J. C. Penney retains a Zacks #5 Rank, which
translates into a short-term "Strong Sell" rating.
PENNEY (JC) INC (JCP): Free Stock Analysis
Report
KOHLS CORP (KSS): Free Stock Analysis Report
MACYS INC (M): Free Stock Analysis Report
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