J.C. Penney results extend gloomy week for retailers
Sales at established J.C. Penney stores faded again during its most recent quarter, capping a gloomy week for U.S. retailers.
Penney’s stock sunk below $4 Friday morning, an alltime low for the 115-yearold retailer.
Another quarter of falling same-store sales from J.C. Penney Co. come a day after similar reports from Macy’s, Kohl’s and Dillard’s, as people increasingly avoid malls and shop online or at discount retailers. Nordstrom stood alone, reporting that its same-store sales rose in the most recent quarter, when it held its annual anniversary sale.
At established Penney stores, sales fell 1.3 percent during the second quarter. It was the fourth straight quarter of declines for Penney, and it was worse than the 1.2 percent drop that Wall Street analysts expected, according to FactSet.
Penney said its results were hurt by the closing of about 130 stores during the quarter.
“We’ve never liquidated this many stores at one time,” said CEO Marvin Ellison, in a conference call Friday.
Penney is making a number of moves to try and reverse its fortunes. The company, which started to sell appliances again last year, said it signed a new deal to sell Electrolux and Frigidaire products. Ellison said he wasn’t concerned about Amazon’s plans to sell Kenmore appliances on its site, a deal Sears Holdings Corp. announced last month. He said Penney customers want to “physically touch” appliances before making the pricey purchases.
To get shoppers to spend more, Penney added toy sections in more stores in time for the back-to-school season after testing them last year. And Penney hopes more young shoppers will visit the Sephora makeup shops inside its 600 locations, one of the chain’s biggest draws, when a new beauty line from singer Rihanna is launched.
The company reported a net loss of $62 million, or 20 cents per share, in the three months ending July 29. In the same period a year ago, it reported a loss of 56 million, or 18 cents per share.
Losses, adjusted for onetime gains and costs, came to 9 cents per share, falling short of the 6 cents per share loss that analysts expected, according to Zacks Investment Research.
Revenue rose 1.5 percent of $2.96 billion, which beat forecasts of $2.87 billion. not materially change the bull-or-bear debate on the company,” Schackart said. “We are encouraged by the company’s early efforts to increase engagement and content creation on the platform through new products and features.”
But Snapchat isn’t as essential an app for many adults as Facebook, and it’s long drawn complaints that its focus on creating posts versus consuming them makes learning the app complicated.
The start of school and football season provides tailwinds that could propel interest in Snapchat as people encounter new friends and dial into sports highlights.
If the penetration figure doesn’t budge in the next earnings report, that could put a wrinkle in Snap’s positioning as a complement to Facebook.
■ Increased repeat advertising and overall growth: Analysts said Thursday they were glad to see that Snap is gaining more money from the same clients.
Snap generated 142 percent more revenue during the first half of 2017 than the first half of 2016 from advertisers who bought an ad during that span last year. The figure counted spending by the same parent company, meaning a new division of a conglomerate giving Snapchat ads a whirl this year would have counted in Snap’s favor.
But experts aren’t impressed that Snap can’t generate steady sales growth — “there is little excuse at this late in the game,” James Cakmak of Monness, Crespi, Hardt & Co. said ahead of the earnings release.
“We’ve defended Snap since day one, but now need to see monetization moving in the right direction,” Cakmak said.
Snap could win over skeptics if its efforts to provide training, software and discounts to small businesses turn into a solid pipeline of ad buys.
■ Keeping sales in line with costs: Snap warned that its technology costs rose in the last part of the second quarter as users flocked to a new, data-intensive feature, Snap Maps.
The company hasn’t put ads in Maps, which highlights the locations of a user’s friends and interesting locales around the world. Snap is new to placing ads in World Lenses, the 3-D, digital sketches that include the internet celebrity known as Dancing Hot Dog.
Spiegel teased upcoming features tied to its digital storage locker for posts, Memories, where there also aren’t ads.
If users spend increased amounts of time in these features but don’t encounter ads in these sections, Snap’s costs could soar. That’s not a problem for Facebook, which often holds off on introducing ads as long as possible because it has more than $35 billion in cash and shortterm investments.
Holding out from placing ads is more difficult for Snap, which has $2.8 billion in cash and marketable investments.
Spiegel expressed confidence the company could bring ads throughout the Snapchat interface.
Until the company demonstrates ads in new sections are valuable, analysts and investors are left to do a lot of guesswork and potentially bet on increased losses.
“As a very-early stage company, Snap remains incredibly difficult to value vs. other companies in our coverage universe,” Brian Wieser of Pivotal Research said Thursday.
Bobby Murphy (left) and Evan Spiegel, co-creators of Snapchat, are seen in 2013 at their company’s offices in Venice, Calif. Despite weaker-than-expected second-quarter earnings, neither man plans to dump Snap shares.