UPDATE 3-Penney shares slammed as holiday quarter sales disappoint
(Adds analyst comment, updates share activity)
By Phil Wahba
Feb 4 (Reuters) - J.C. Penney Co Inc shares fell 10 percent on Tuesday after the struggling retailer reported a disappointing rise in comparable sales for the holiday quarter, prompting fears its business is recovering too slowly.
Penney also did not provide details on its gross profit margin, leading Wall Street analysts to conclude the department store operator had to resort to bigger discounts during the holiday season.
Sterne Agee lowered its price target on Penney share to $3 from $9, while JP Morgan cuts its target price to $5 from $6.
Shares fell as much as 13.7 percent to $4.90, their lowest level in decades. They were trading at $5.11 in mid-afternoon trading.
Penney's comparable sales - those online and at stores open at least a year - rose 2 percent during the fiscal fourth quarter. That was less than the 4 percent analysts were expecting, according to Thomson Reuters I/B/E/S.
"The slope of the improvement needed to be much better to effect the kind of turnaround that JCPenney needs," said Sterne Agee analyst Charles Grom.
Still, Penney said it had $2 billion in liquidity available at the end of the quarter, in line with its earlier forecasts, easing concern about how much cash it was using up as it attempts to fix its business.
It was the retailer's first three-month period of growth in two years. But it also came a year after Penney reported a 31.7 percent quarterly decline, as the retailer's now-abandoned attempt to go up-market by ditching coupons and opening in-store boutiques for hip brands failed to catch on with shoppers.
"Keep in mind, however, that comparisons for the chain have been decidedly easy and that JCP likely resorted to very aggressive price promotions," Oppenheimer analyst Brian Nagel wrote in a research note.
Chief Executive Officer Myron Ullman pointed to a tough holiday quarter for retail in general, further hurt by bad weather, but said Penney's turnaround was "on track."
Retailers from Target Corp and Family Dollar Stores Inc to Victoria's Secret parent L Brands Inc have lowered profit forecasts in recent weeks following what analysts said was the most discount-driven holiday season in years.
In 2013, Penney lined up a $2.25 billion financing package and in September sold nearly $800 million in new shares to shore up its finances.
The company last month said it would close 33 of its 1,100 stores and cut 2,000 jobs. (Reporting by Phil Wahba; Editing by Lisa Von Ahn and James Dalgleish)
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