J.C. Penney Revenue Misses Estimates, Extending Retail Woes

  • Department-store chain maintains full-year Ebitda forecast
  • Rivals Macy’s and Kohl’s have also posted weak results

What Happened to U.S. Retailers?

J.C. Penney Co. posted first-quarter revenue that trailed analysts’ estimates, becoming the latest U.S. retailer affected by a consumer malaise that’s weighing on department-store sales.

Revenue fell 1.6 percent to $2.81 billion in the quarter ended April 30, the Plano, Texas-based company said in a statement Friday. Analysts’ projected $2.92 billion, on average. Same-store sales slipped 0.4 percent. Analysts had estimated a 3.3 percent gain, according to Consensus Metrix.

J.C. Penney’s disappointing sales signal that shoppers across the income spectrum are pulling back on purchases of apparel and other discretionary goods. Similarly gloomy first-quarter results have come from fellow discount-oriented chain Kohl’s Corp. as well as higher-end rivals such as Macy’s Inc. and Nordstrom Inc. J.C. Penney’s same-store sales drop was its first in 10 quarters, threatening to erode the optimism the company had generated with a strong performance during the holiday shopping season.

The shares fell as much as 6.3 percent to $7.31 in New York. J.C. Penney had surged 17 percent this year through Thursday.

The results came on the same day that U.S. Commerce Department figures showed retail sales in April rose 1.3 percent after a decline in March. The measure, which tracks categories of merchandise that J.C. Penney doesn’t sell, was led by gains at auto retailers. It also showed strong gains in e-commerce, indicating brick-and-mortar retailers may be losing sales to online competitors.

Even with sales coming in weaker than expected, J.C. Penney has managed to limit the damage to its bottom line. The loss in the quarter was 32 cents a share, excluding some items. Analysts had estimated a deficit of 37 cents.

Maintaining Forecast

The department-store chain also said it still expects to achieve its forecast of earnings before interest, taxes, depreciation and amortization of $1 billion this year, which would be the highest in five years. However, the company also said gross margin would only expand as much as 0.3 percentage point, lower than the gain of as much as 0.6 percentage point it had previously projected.

The forecast includes maintaining that same-store sales will gain 3 percent to 4 percent this year, even with a disappointing first quarter. The company had confidence to keep that projection because after revenue declined in March, it rebounded in the final two weeks of April and into early May, Chief Executive Officer Marvin Ellison said on a call with analysts. Results will also be aided by revamping its hair salons and window-treatment departments while rolling out large appliances to 500 stores, he said.

“These initiatives in the second half for the year are very significant,” Ellison said.

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