J.C. Penney posts surprise drop in same-store sales, shares slip
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A woman checks her phone outside the entrance of a J.C. Penney store in New York August 14, 2013. REUTERS/Brendan McDermid/File Photo
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By Siddharth Cavale
(Reuters) - J.C. Penney Co Inc (NYSE: JCP) reported a surprise 0.8 percent fall in quarterly comparable-store sales on Friday, reflecting weak traffic, increasing competition from online and off-price retailers and a general shift away from spending on apparel.
The company said a warmer-than-usual September and disruptions caused by the company's rollout of appliance showrooms in 500 stores during the quarter also hurt sales.
As a result Penney, cut its full-year sales growth forecast for stores open at least a year to 1-2 percent from 3-4 percent.
Analysts on average had expected Penney's same-store sales to increase 2.7 percent in the third quarter ended Oct. 29, according to research firm Consensus Metrix.
All apparel categories - men's, kids and women - performed below expectations, Chief Executive Marvin Ellison said on a conference call with analysts.
Penney, aiming to capitalize on the declining fortunes of rival Sears Holdings Corp (NASDAQ: SHLD), opened 113 appliance showrooms in one week to take advantage of the Columbus Day holiday weekend. The process was more complex than expected, creating disruption in stores that hit sales, Ellison said.
However, sales improved in the last two weeks of the quarter and Ellison said the company expected same-store sales to increase by 2-5 percent in the current quarter.
Helped by the encouraging forecast, J.C. Penney's shares recovered to trade about 1.6 percent down in early trading after falling as much as 9 percent before the opening bell.
Up to Thursday's close of $8.81, J.C. Penney's shares had risen 32.2 percent since the start of the year as the company outperformed its rivals in same-store sales, benefiting from falling unemployment and rising wages.
Penney and other traditional retailers have been struggling to overcome intense competition from online retailers such as Amazon.com Inc (NASDAQ: AMZN) and off-price outlets such as TJX Cos Inc's (NYSE: TJX) T.J.Maxx, which offer deep discounts on apparel.
Penney, which caters mainly to lower-income shoppers, joins its closest rivals in reporting a drop in same-store sales in the latest quarter. Macy's Inc (NYSE: M), the biggest U.S. department store operator, reported a 2.7 percent decline while Kohl's Corp (NYSE: KSS) posted a drop of 1.7 percent.
Penney's net sales fell 1.4 percent to $2.86 billion, missing analysts' average estimate of $2.95 billion, according to Thomson Reuters I/B/E/S.
The company also recorded its 11th straight quarterly net loss, of $67 million, or 22 cents per share. However, this was an improvement from last year's loss of $115 million, or 38 cents per share, as the company continued to cut costs.
Excluding items, Penney lost 21 cents per share.
Still the company, like its rivals, was upbeat going into the most important shopping period of the year. "We are excited about the initiatives we have in place to drive incremental growth during the holiday season," Ellison said.
(Reporting by Siddharth Cavale in Bengaluru; Editing by Ted Kerr)
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