NEW YORK -- J.C. Penney Co. dropped more bad news on investors Thursday, estimating that sales for the current year at established stores would be down more than Wall Street expected.
The disappointing sales outlook came as the struggling department store chain delivered fourth-quarter profits that beat estimates.
Shares of Penney fell 5% on the disappointing outlook along with the broader markets.
The company also said it will close at least six more stores in fiscal 2020, following analysts' calls for reductions.
Department stores are trying to reinvent themselves at a time when Americans are buying more clothing online or from discounters like T.J. Maxx.
But J.C. Penney is still trying claw its way back after a disastrous reinvention plan in 2012 implemented by former Chief Executive Officer Ron Johnson, who dramatically cut back on promotions and brought in new brands with hopes of attracting younger shoppers. Penney's sales went into a free fall, and many longtime customers walked away and have not returned.
Penney's CEO Jill Soltau acted swiftly when she joined the company in October 2018, eliminating from stores major appliances that were weighing down operating profits. That reversed the strategy of her predecessor, Marvin Ellison, who put appliances on the showroom floor to capitalize on the troubles of another ailing department store, Sears.
Soltau turned the company's focus back to women's clothing and goods for the home like towels and bedsheets, which carry higher profit margins. Furniture is still available, but only online. In the latest quarter, Penney relaunched its private-label brand called A.N.A., with a more casual feel and a focus on denim. The company is positioning the brand as an anchor for all-day dressing.
During a conference call Thursday, Soltau tried to assure analysts that the company was making progress in turning around its business.
"There are no quick fixes when you are turning around a major retailer," Soltau said. "We are methodically rebuilding the company's foundation, and I continue to be encouraged by the progress we are making."
Penney reported that net income fell to $27 million, or 8 cents per share. Earnings, adjusted for restructuring costs and nonrecurring costs, were 13 cents per share. The results beat Wall Street expectations. The average estimate of four analysts surveyed by Zacks Investment Research was for a loss of 8 cents per share.
Revenue declined 7.7% to $3.49 billion in the period.
The company said same-store sales fell 7%, and on an adjusted basis declined 4.7% when taking into account its moves to get rid of furniture and major appliances in its stores. The company expects same-store sales to be down 3.5% to 4.5% for the current fiscal year. That is much worse than the 0.7 % decline that analysts polled by FactSet were expecting.
The Plano, Texas, company also said that it remains too early to include the impact of the new virus in its financial outlook, noting that the situation is "fluid."
The company's shares fell nearly 5% to 69 cents in afternoon trading. A year ago, they were trading at $1.25.
Information for this article was contributed by Anne D'Innocenzio of The Associated Press; and by Jordyn Holman and Katherine Doherty of Bloomberg News.
Business on 02/28/2020