J.C. Penney Stock Tanks on Unexpected Drop in Sales
Even the receive comeback retailer J.C. Penney was not spared from being slammed this spring by shoppers.
The chain of department stores was the most recent to report weak comparable sales for the first quarter, posting a drop of 0.4%, while Wall Street was expecting an increase of much more or 3.3%.
It is the first fall in sales for the retailer in 10 quarters. Shares of the retailer, which already have fallen a third from March’s high of 52 weeks, fell by over 12% in Friday premarket trading.
J.C. Penny’s quarterly results follow ones that were even worse from peers in department store retail such as Macy’s, Kohl’s and Nordstrom earlier this week.
The department store industry is struggling as its shoppers are moving online to stores such as Amazon.com or they are buying their clothes in places that are less expensive such as T.J. Maxx.
J.C. Penney has been outperforming its rivals during the past few quarters as it looks to fight back and earn back the sales it lost during both 2012 and 2013, when the retailer failed miserably in its attempt to become hipper.
Its prime focus on its own, more profitable brands in-house, and the rebuilding of its online e-commerce site has helped the retailer post a number of quarters with growth that beat numbers of its peers.
However, the company is debt laden and remains far from being profitable. Any slowdown of its sales unnerves its investors.
Penney has reiterated it was on track to hit profit of $1 billion in 2016, by EBITDA, which is a metric that lenders look at closer than others.
Penny’s sales for 2016 are expected to still be only $13.4 billion equal or 33% less than its all-time highs of one decade ago.
Penney has bet that expanding its cosmetics booths Sephora, which typically produce 4 times more sales for each quarter, its just released appliances areas as well as new line of plus-size boutiques that will help to keep it online.
We are confident the turnaround is still on track and are excited about the sales drivers for 2016, said Marvin Ellison the CEO.
Penney kept its forecast intact that its sales at comparable stores would grow by between 3% and 4% despites its slow start, citing recent trends in sales.
Total sales for its first quarter were down 1.6% to just over $1.8 billion, while its net loss, dropped by 54.8% to just over $68 billion.