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Here's Why J. C. Penney (JCP) Fell Despite Q4 Earnings Beat

J. C. Penney Company, Inc.JCP reported mixed results in fourth-quarter fiscal 2017. The company's earnings outpaced the Zacks Consensus Estimate but revenues lagged the same.

Following the results, the stock declined 5.4% on Mar 2. This downturn was primarily due to lower-than-expected top-line and comparable-store sales (comps) performances, soft fiscal 2018 outlook and job cut announcement. The company is reducing its workforce by more than 300, per media sources.

In the past six months, shares of the company have declined 9.5% against the industry 's gain of 42.1%.

Let's Delve Deeper

J. C. Penney posted adjusted earnings per share of 57 cents, beating the Zacks Consensus Estimate of 45 cents. In the prior-year quarter, it had reported adjusted earnings per share of 64 cents. On a GAAP basis, the company's net earnings came in at 41 cents compared with 61 cents in the year-ago quarter.

On the contrary, total net sales of $4,031 million missed the Zacks Consensus Estimate of $4,035 million. However, the metric increased 1.8% year over year after witnessing a decline of 1.8% in the preceding quarter. Moreover, comps rose 2.6% compared with an increase of 2% in the prior-year quarter. Notably, the company's home, Salon, Jewelry, Sephora, footwear and handbags divisions performed well, resulting in a year-over-year increase in revenues and comps.

While gross profit in the quarter increased 3.3% to $1,355 million, gross margin improved 50 basis points (bps) to 33.6%. Nevertheless, adjusted EBITDA declined to $413 million from $449 million in the year-ago quarter, while adjusted EBITDA margin decreased 110 bps to 10.2%.

Per management, it is focusing on transforming the company from a brick and mortar retailer to omnichannel. In 2017, J. C. Penney's online SKUs increased by 50%. It further plans to add 600,000 more SKUs in 2018.

J.C. Penney Company, Inc. Holding Company Price, Consensus and EPS Surprise

J.C. Penney Company, Inc. Holding Company Price, Consensus and EPS Surprise | J.C. Penney Company, Inc. Holding Company Quote

Financial Details

J. C. Penney ended fiscal 2017 with cash and cash equivalents of $458 million compared with $887 million at the end of fiscal 2016. Meanwhile, long-term debt came in at $3,708 million, down from $4,339 million in the year-ago period. Shareholders' equity totaled $1,379 million at the end of quarter. Merchandise inventory levels decreased 3.2% to $2,762 million.

In the reported quarter, this Zacks Rank #3 (Hold) company also generated free cash flow of $530 million compared with $670 million in the prior-year quarter. Further, it incurred capital expenditures of $108 million down from $145 million in the year-earlier quarter.

2018 Outlook

For fiscal 2018, the comps are projected in the range of flat to up 2%. Cost of goods sold is expected to decline marginally compared with the last year figure. However, in the first quarter of fiscal 2018, J. C. Penney is likely to witness 40-60 basis points increase in costs of goods sold. In the second and third quarter, it projects a reduction in cost of goods sold. Adjusted earnings per share are anticipated in the band of 5-25 cents. The Zacks Consensus Estimate for fiscal 2018 is pegged at 17 cents.

Interested in the Retail Space? Check These

Some better-ranked stocks from the retail space are Dillard's, Inc. DDS , Kohl's Corporation KSS and Macy's, Inc. M , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Dillard's delivered a positive earnings surprise in the trailing two quarter.

Kohl's pulled off a positive earnings surprise in the trailing three out of four quarters, with an average beat of 11.6%.

Macy's has a long-term earnings growth rate of 8.5%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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