J.C. Penney stock plunges 26% as struggles continue
Without a CEO at its helm after the departure of former boss Marvin Ellison, J.C. Penney’s troubles spiraled in the second quarter.
The department store chain boosted sales to clear out excess inventory, but that contributed to widening losses.
The retailer warned it has been flooded by excess inventory based on past commitments to carry products that aren’t selling well. That has prompted J.C. Penney to raise discounts, which inevitably led to red ink.
The company acknowledged that it tried to get youthful and trendy and lost touch with its core customer, which it considers to be women ages 45 to 55. So the retailer is refocusing its efforts on reaching that demographic.
“We need to make sure that we win her, that we have the merchandise that’s important to her, such that she thinks about cross-shopping, not only for herself, but for her family,” Chief Financial Officer Jeffrey Davis said on a conference call.
Concerned investors drove J.C. Penney’s stock down more than 25 percent Thursday, closing at $1.76 a share.
“Now more than ever, we must be more intently focused on executing upon fundamentals of our core business. The time for discussion has passed, and the time for action is now,” Davis said.
Neil Saunders, managing director of GlobalData Retail, said J.C. Penney “just feels increasingly tired and lacking in spirit. One of the key problem areas is fashion where JCP remains unfocused and unsure about its strategy,” Saunders wrote. “Indeed, the company has changed direction several times – first trying to attract younger shoppers, then younger moms, and now back to older shoppers. In our view, this flailing around is a symptom of a wider problem in that J.C. Penney no longer has a sense of what it wants to be and who it wants to serve. It is, therefore, in something of a no man’s land and fails to inspire anyone in particular.”
Despite the discounts, secondquarter sales at stores open at least a year rose only 0.3 percent. And the company’s second-quarter net loss more than doubled from $48 million to
$101 million.
Total sales fell 7.5 percent to $2.76 billion, in part because J.C. Penney closed 141 stores last year. With more than 860 stores remaining, the company could face pressure to close more locations to cut costs.
But Davis said the company hadn’t made any decisions on whether to close more stores. “As you can imagine, we continue to look at our store fleet and totality over time,” he said.
J.C. Penney announced this month that it would begin stocking cribs, high chairs and baby products in 500 locations as it aims to pick up business from the now-closed Babies R Us.
Positive contributors included the first quarterly sales increase for women’s apparel since the fourth quarter of
2015, the Liz Claiborne brand and “strong growth” in the plus-size business. Children’s products, jewelry and Sephora beauty products also performed well.
The company has been run in recent months by a quartet of executives rather than a single interim CEO. J.C. Penney Chairman Ronald Tysoe said the search for a permanent CEO “is going well, and the board has met with highly qualified candidates.”