JC Penney shares slump after outlook cut

29 October, 2017, 04:08 | Author: Manuel Hopkins
  • JC Penney Slashes Earnings Forecast On Inventory Liquidation; Stock Dives To Record Low

J.C. Penney's problems continued despite the current economic environment that should lift the struggling business of the department store chain.

The company's shares plunged 81 cents, or 22.1%, in Friday trading to $2.85, with the news pulling down shares of rivals Macy's Inc (NYSE: M) and Kohl's Corp (NYSE: KSS) as well. Adjusted earnings per share losses for the quarter are expected to be in the range of $0.40 to $0.45.

Penney's heavy discounting was across its apparel lines, with the women's section singled out for an overhaul to expand its inventory of casual and contemporary merchandise.

Gordon Haskett analysts said Penny's forecast implied its comparable-store sales likely fell about 3.5 percent in August, which was concerning given it was during the back-to-school period and in a month when weather was favorable.

CEO Marvin Ellison said in a statement that the retailer decided, after seeing positive initial results, to accelerate "a wider transformation of the entire women's department by clearing slow-moving inventory, primarily in women's and other apparel categories".

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The department store chain said it is expecting an increase of between 0.6% and 0.8% in comparable sales when it posts its third quarter results in two weeks.

Penney estimated it would post an adjusted loss of 40-45 cents per share in the quarter ending October 28, much bigger than analysts average estimate of 18 cents, according to Thomson Reuters I/B/E/S.

However, for the quarter that ends tomorrow, the retailer forecasts that store sales will see a bump between 0.6% and 0.8%, largely due to stronger sales of large appliances.

Penney also cut its forecast for adjusted earnings for the full year to between 2 cents and 8 cents, from its previous 40 cents to 65 cents. Following this decision, he said, the retailer saw "an improvement in performance".

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