J.C. Penney stabilizing as holidays approach
Department store chain’s losses widen in third quarter
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.
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.