J.C. Penney and Foot Locker Sink After Weak Sales ResultsBy , , and
Shoe chain’s weak earnings drag down other athletic brands
Results contrast with generally strong Christmas season
After the strongest holiday-shopping season in more than a decade, investors have grown increasingly impatient with retailers that didn’t enjoy the good fortune.
Shares of J.C. Penney Co. and Foot Locker Inc. tumbled on Friday in the wake of lukewarm results during the fourth quarter, which included the crucial Christmas season. The chains both posted weaker-than-expected comparable sales, a key benchmark.
The sharp reaction underscores the concerns that are still swirling around brick-and-mortar chains in the U.S., even as the retail picture brightened in recent months. Foot traffic remains sluggish at many American malls, and Amazon.com Inc. gobbled up about half of the e-commerce growth during the holidays.
The industry also is facing a tougher problem: Even after closing thousands of locations in recent years, U.S. retailers still have too many stores.
“We still think there are more store closings ahead in 2019 and beyond,” said Poonam Goyal, an analyst at Bloomberg Intelligence. “The landscape in the U.S. is still very much overstored.”
More than 100 million square feet in store closings were announced last year, according to CoStar Group Inc., a commercial real estate information firm. So far this year, that figure is at more than 32 million square feet. Long-term, about 1 billion square feet of retail space may need to close, CoStar research director Suzanne Mulvee estimated.
The bright spot on Friday was Gap Inc., which reported much faster sales growth at its Old Navy chain. The company’s namesake brand and Banana Republic have lagged behind, but they still performed better during the holidays than expected.
At Foot Locker, sluggish demand for sneakers -- especially categories like basketball shoes -- battered results. Same-store sales decreased 3.7 percent during the quarter, deeper than the estimated 2.4 percent drop.
Foot Locker shares plunged as much as 17 percent, marking the biggest intraday drop since August.
Pessimism spread to other athletic retailers, including Dick’s Sporting Goods Inc. Its shares fell as much as 6.8 percent, their worst performance in almost four months. Nike Inc., Foot Locker’s biggest supplier, also slipped.
Department stores, meanwhile, are striving to stay relevant in an era when they’re no longer the stars of the retail industry.
J.C. Penney has been especially hard-hit. Though its sales rebounded during the holidays, the bounce was weaker than Wall Street anticipated. Its same-store sales gained 2.6 percent, short of the 3.1 percent projected by analysts. The company’s shares tumbled as much as 13 percent Friday.
Nordstrom Inc., which also reported results ahead of the trading session, saw its shares rebound after an initial drop. The company has struggled to turn around its discount Rack chain, but it showed progress on that front last quarter. Sales declined less than analysts predicted.
“That is quite encouraging,” Goyal said. “That is a catalyst for 2018 gains.”