J.C. Pen­ney re­sults ex­tend gloomy week for re­tail­ers

Austin American-Statesman - - BUSINESS -

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.

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