J.C. Penney sales plunge, much worse than expected
(Reuters) - J.C. Penney Co Inc (JCP.N) reported sales at stores open at least a year fell 31.7 percent in the fourth quarter, a much worse-than-expected plunge that might put Chief Executive Ron Johnson's future at the company at risk.
The poor results for the quarter, which included the holiday season, capped a rough first year for Penney's restructuring. The company's shares fell 14.5 percent to $18.09 in after hours trading.
Johnson, who was brought in to revive the chain after running Apple Inc's (AAPL.O) retail business, acknowledged that he made a serious mistake in with pricing.
"We also made some big mistakes and I take personal responsibility for these," he said on a conference call on Wednesday night.
Analysts, who had already been expecting same-store sales to decline 27.8 percent, said the even weaker figure put huge pressure on Johnson.
"He's going to have recover this year or he's done," said Ron Friedman, retail practice leader at the consulting firm Marcum LLP. "He's running out of time. He has to have it turned around by the third quarter."
Hedge fund manager William Ackman, whose Pershing Square Capital Management is Penney's top shareholder, has repeatedly professed his faith in Johnson's strategy and said it would take a few years to come to fruition.
Penney reported a net loss of $552 million, or $2.51 per share in the 14 weeks ended February 2, compared with a loss of $87 million, or $0.41 per share for a 13-week period a year earlier.
Excluding restructuring charges and non cash pension plan expenses, the company posted an adjusted loss of $1.95 per share, as net sales fell 27 percent to $3.88 billion. The loss was nearly three times worse than even the most pessimistic Wall Street estimate tracked by Thomson Reuters I/B/E/S, while sales were also below forecasts.
Gross margin was 23.8 percent of sales, down 6.4 percentage points from a year earlier. The company blamed lower-than-expected sales and a higher level of sales on clearance.
Retailers ranging from Kohl's Corp (KSS.N) to Target Corp (TGT.N) said the holiday was heavily discount-driven, putting additional pressure on Penney's no sales, no coupon philosophy.
The department store chain had $930 million in cash and cash equivalents at the end of the quarter. Analysts had been closely watching the cash figure to see if it dropped much below the $1 billion mark.
"Looks like they really did not burn that much cash," Morningstar analyst Paul Swinand said, pointing to the fact that operating cash flow for the year was roughly neutral. "That's surprisingly good for such bad results."
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