J.C. Pen­ney sta­bi­liz­ing as hol­i­days ap­proach

Depart­ment store chain’s losses widen in third quar­ter

The Washington Times Daily - - Business - BY ANNE D’INNOCENZIO

NEW YORK | J.C. Pen­ney’s losses widened in the third quar­ter, but the re­sults re­leased Wed­nes­day show its busi­ness is start­ing to sta­bi­lize head­ing into the crit­i­cal hol­i­day shop­ping sea­son.

The strug­gling depart­ment store chain is try­ing to re­cover from a botched trans­for­ma­tion plan spear­headed by for­mer CEO Ron John­son that led to dis­as­trous re­sults. The board re­hired the pre­vi­ous CEO, Mike Ull­man, and ousted Mr. John­son in April, 17 months into his ten­ure.

Un­der Mr. Ull­man, Pen­ney’s is bring­ing back more-fre­quent sales and ba­sic mer­chan­dise elim­i­nated by Mr. John­son, who was try­ing to woo more-af­flu­ent, younger shop­pers. The strat­egy ap­pears to be re­vers­ing the sales de­clines, but the ques­tion is whether the im­prove­ment can be sus­tained through the hol­i­day shop­ping sea­son and be­yond.

Huge losses have taken a toll on the com­pany, and an­a­lysts ex­pect losses to con­tinue into the first half of next year. Pen­ney’s and oth­ers are brac­ing for a fiercely com­pet­i­tive hol­i­day sea­son.

The depart­ment store faces an up­hill bat­tle to woo its once-loyal shop­pers back.

It amassed nearly $1 bil­lion in losses and its rev­enue dropped 25 per­cent for the fis­cal year that ended Feb. 2, the first year of the failed trans­for­ma­tion strat­egy.

For the tra­di­tional hol­i­day shop­ping sea­son kick­off, Pen­ney’s is open­ing its doors at 8 p.m. on Thanks­giv­ing, fol­low­ing other ri­vals that are open­ing that day. Last year, Pen­ney’s was a late starter, open­ing its doors at 6 a.m. on the day af­ter Thanks­giv­ing.

Pen­ney’s is also step­ping up its hol­i­day bar­gains com­pared with last year, when it cob­bled to­gether deals at the last minute.

In a state­ment re­leased Wed­nes­day, Mr. Ull­man said he is “en­cour­aged” by sales in the early weeks of Novem­ber.

“Our strate­gies to re­con­nect with cus­tomers are be­gin­ning to take hold, and this be­came in­creas­ingly clear as the quar­ter pro­gressed,” Mr. Ull­man said.

The depart­ment store chain, based in Plano, Texas, said Wed­nes­day that it lost $489 mil­lion, or $1.94 per share, in the three months that ended Nov. 2. That com­pares with a loss of $123 mil­lion, or 56 cents per share, a year ear­lier.

Rev­enue fell 5.1 per­cent to $2.78 bil­lion. The com­pany’s ad­justed loss was $1.81 per share. An­a­lysts ex­pected a loss of $1.74 per share on rev­enue of $2.79 bil­lion.

Rev­enue at stores open at least a year fell 4.8 per­cent for the quar­ter, but the pe­riod ended with its first monthly gain since De­cem­ber 2011.

Pen­ney’s gross profit mar­gins have been ham­mered as it has had to heav­ily dis­count an over­sup­ply of mer­chan­dise from the first half of the year. But the com­pany said that gross profit mar­gin im­proved to 29.5 per­cent in the quar­ter, com­pared with 32.5 per­cent last year.

The stock has been hov­er­ing around $9, down 54 per­cent this year. The shares have lost 79 per­cent of their value since Fe­bru­ary 2012, when in­vestor en­thu­si­asm was high on Mr. John­son’s trans­for­ma­tion plan.

AS­SO­CI­ATED PRESS

Cus­tomers shop at a J.C. Pen­ney store in New York. The depart­ment store faces an up­hill bat­tle to woo its once-loyal shop­pers back fol­low­ing a botched trans­for­ma­tion plan spear­headed by for­mer CEO Ron John­son that led to dis­as­trous re­sults.

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