* First quarter same-store sales down 16.6 percent
* Penney had $821 million in cash at end of quarter
* Shares up 1.6 pct after hours
By Phil Wahba
May 7 J.C. Penney Co Inc on Tuesday
reported another quarter of steep sales declines, hit by the
lingering effects of its former chief executive's failed
But Wall Street brushed off the news after the company,
which last month brought back ex-CEO Myron Ullman to turn around
its operations, reported cash levels that implied the department
store chain had gone through less money than feared. Vendors and
analysts expect sales to improve later this year.
Shares rose 1.6 percent to $16.66 in after-hours trading.
Penney, coming off a 25 percent sales plunge in 2012 largely
blamed on former CEO Ron Johnson's strategy of eliminating
coupons and sales in favor of everyday lower prices, reported
that same-store sales, or sales at stores open at least a year,
fell 16.6 percent in the first quarter.
Analysts were expecting a drop of 13.2 percent, according to
Thomson Reuters I/B/E/S.
Johnson was ousted last month and Ullman, whom he replaced
in late 2011, has increased the pace of sales in the last two
weeks and overseen an apologetic ad campaign aimed at winning
Penney reported quarterly sales of $2.64 billion, below the
$2.74 billion Wall Street was expecting, according to Thomson
Some of the decline stemmed from a renovation at the home
goods section at 500 of Penney's larger stores ahead of a
re-opening this spring with brands by designers such as Jonathan
Adler and Martha Stewart.
"This is all on Ron Johnson's dime," said Bernard Sosnick of
Gilford Securities Inc about the first quarter results.
Penney will report full quarterly results May 16. Wall
Street is more concerned about whether sales are improving now
that the company has brought back some of its most popular
private brands and old pricing strategy that included coupons
and discounts, said Sosnick.
There is a sense among analysts and Penney vendors that
sales are already improving since Penney brought back private
brands like St. John's Bay clothing and a more aggressive
promotion and discounting schedule, including using clear
language like "sale" and "25 percent off."
"I think the direction the company is heading in is one that
has higher probability of succeeding," Newell Rubbermaid Inc
Chief Executive Mike Polk told Reuters last week. Newell
sells items like Calphalon cookware and Levolor window
treatments at Penney. Newell took a big hit because of Penney's
sales hemorrhage last year.
PVH Corp Chief Executive Manny Chirico last week
said at an investor conference that he thinks Penney will be
able to win back customers and expects Penney's same-store sales
to go positive in the second half of the year. The company is a
major supplier of menswear to Penney, including Izod brand.
The company, in providing preliminary, partial results for
the quarter, said it had $821 million in cash on hand as of May
4, which suggested it had gone through $870 million in cash in
the quarter, according to an estimate by Morningstar analyst
In a research note put out on Tuesday before Penney reported
its results, Morgan Stanley analyst Kimberly Greenberger had
estimated Penney had burned through $1.2 billion in cash.
Investors expect to hear more on the earnings call about
whether Ullman will try to preserve cash by not opening more
branded boutiques within Penney stores, a key part of Johnson's
Last week, Penney said it had lined up a five-year, $1.75
billion financing deal with Goldman Sachs, its latest move to
shore up its finances as it looks to stabilize its operations.