J.C. Penney on Thursday reported quarterly earnings and revenue that missed analysts’ expectations, as it continues to grapple with the overhang of unsold merchandise.
As fast fashion brands like Zara have trained shoppers to shop new styles more frequently, retailers like J.C. Penney have struggled to build a supply chain to support quick inventory changes and to gather the data needed to anticipate what will be on trend.
J.C. Penney reduced its outlook for fiscal 2018, saying it now expects an adjusted loss per share of $1 to 80 cents and same-store sales to be flat.
Shares of the company were down nearly 22 percent in premarket trading Thursday.
Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Thomson Reuters:
- Losses per share: 38 cents, adjusted, vs. 6 cents, expected
- Revenue: $2.76 billion vs. $2.86 billion expected
Chief Financial Officer Jeffrey Davis said Thursday that the department store has “changed its approach to inventory management from ‘buying to store capacity’ to ‘buying and chasing’ into demonstrated sales trends.” It is slashing the prices of products that have not sold, this time to clear its shelves for fall and back-to-school inventory.
The company told analysts Thursday morning on a conference call that it expects to reduce its total inventory by at least $250 million.
It also said it is establishing “several new partnerships” to improve its buying process, ensure its products are more on trend and better display its merchandise.
Still, it’s not the first time the company has had this challenge. Last year, J.C. Penney slashed its profit and sales forecasts when it had to discount heavily ahead of the holidays.
J.C. Penney reported fiscal fourth-quarter net loss of $101 million, or 32 cents per share, more than double its loss of $48 million, or 15 cents cents per share a year earlier.
Excluding items, J.C. Penney lost 38 cents per share, worse than the loss of 6 cents per share expected by analysts surveyed by Thomson Reuters.
Net sales declined 7.5 percent percent to $2.76 billion, missing expectations of $2.86 billion.
The earnings report is the first since CEO Marvin R. Ellison announced his resignation this spring to head to the same position at Lowe’s.
The departure came at an inopportune time for Penney, which has struggled to compete within the quickly evolving retail landscape as consumers shift their shopping online and away from the mall. Last year, it closed more than 100 stores.
Under Ellison, J.C. Penney had taken a number of efforts to help spur a turnaround, including a focus on beauty and appliances. In a bid to boost traffic, the retailer has focused on its salon business, hoping hair-dresser loyalty would turn into shopping frequency.
J.C Penney Chairman Ronald W. Tysoe said Thursday the CEO search “is going well and the board has met with highly qualified candidates who have expressed a strong desire to become the next leader of JCPenney. The hiring of a new CEO is the top priority of the Board of Directors and we will continue to expedite the process in order to bring this search to a successful conclusion.”
In March, it eliminated 230 positions and announced the departure of executive vice president of Penney’s omnichannel business, Mike Amend.