JCPenney (JCP) Flubs Q2 Results as Costs Rise, Sales Don't

August 10, 2012 8:04 AM EDT
JCPenney (NYSE: JCP) once again easily exceeded expectations with its Q2 report -- and we can't emphasize that enough -- by posting a...

Wait, what's that? Oh, you don't say...

JCPenney reported a wider-than-expected second-quarter 2012 adjusted loss of 37 cents per share, to the chagrin of retail investors everywhere.

The adjusted loss of $81 million was a swing into negative territory from profit of $41 million in the same period last year.

Sales at the transitioning retailer slipped 22.6 percent to $3.02 billion, while comparable-store sales dropped a staggering 21.7 percent. Imagine letting a stone fall into a well and never hearing the splash.

Overall, expectations called for sales of $3.2 billion with a more modest loss of just 25 cents per share.

In other news, we'll have what JCPenney CEO Ron Johnson is having: "We have now completed the first six months of our transformation and while business continues to be softer than anticipated, we are confident the transformation of jcpenney is on track. The transition from a highly promotional business model to one based on everyday value will take time and we will stay the course." Actually, make it a double.

(We're not sure why the company insists on lower-casing the name. James Cash Penney must be rolling over in his grave right now.)

Gross margins slipped 510 basis points to 33.2 percent, though adjusted margins came in at 36.6 percent.

Restructuring charges totaled $159 million in the quarter.

Adding icing to the pie, JCPenney said it no longer expected to achieve adjusted earnings expectations for fiscal 2012. The Company said it "expects to end the fiscal year with in excess of $1 billion of cash on the balance sheet after spending $800 million in capital expenditures to support the Company's transformation efforts and paying off $230 million of notes due in August 2012."

Analysts at Deutsche Bank sum it up nicely: "At first blush, the JCP print is not very pretty. At second blush, the JCP print might be even worse than the first blush."

But, this might mean a bottom for JCPenney. Though the stock is indicated 11 percent lower in pre-market action, it might be ripe for a relief rally later today or sometime next week. It still has a book value of about $16.70 per share with cash of just over $4 per share.

If you're a JCPenney investor, you know what you have to do now: go shopping.

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JC Penney on 2012-08-11 12:54:44
Mark as Spam | Reply to this comment

Have you shopped there recently?
Biggest mistake I've ever seen.

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