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JC Penney (JCP) Shares Plunge on Q1 Loss & Sales Decline

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J. C. Penney Company, Inc. (JCP - Free Report) commenced fiscal 2018 on a dismal note. Lower-than-expected sales along with the slashed guidance hurt investors’ sentiments. Consequently, shares plunged 12.4% during the trading session on May 17.In a month, shares of the company have declined 11.5% against the industry’s gain of 7.5%.    

This apparel and home retailers posted first-quarter fiscal 2018 adjusted loss per share of 22 cents that came in line with the Zacks Consensus Estimate after a beat in the last two quarters.Also, the loss figure compared unfavorably with the year-ago figure of a cent.

J. C. Penney, which shares space with Macy's (M - Free Report) , generated total net sales of $2,584 million that decreased 4.3% year over year due to 141 store closures in fiscal 2017. The figure missed the Zacks Consensus Estimate of $2,605 million. This is the second straight quarter that the company has missed the top line estimate. Credit income and other came in at $87 million, which increased 4.8% on a year-over-year basis.

J. C. Penney Company, Inc. Price, Consensus and EPS Surprise

J. C. Penney Company, Inc. Price, Consensus and EPS Surprise | J. C. Penney Company, Inc. Quote

 

Let’s Delve Deeper

Comparable sales (comps) managed to achieve growth in the quarter compared with the decline of 3.5% recorded in the prior-year period. Although positive comps in February and March buoyed optimism, the same was dented in April, resulting in quarterly comps inching up 0.2%. Per management, the comps were impacted by a late start to spring as the temperature was coolerthannormal across much of the country in April.

While gross profit in the quarter decreased 10.7% to $872 million, gross margin as a percentage of total net sales contracted 240 basis points (bps) to 33.7%. Nevertheless, adjusted EBITDA declined to $151 million from $238 million in the year-ago quarter, while adjusted EBITDA margin as a percentage of total net sales decreased 297 bps to 5.8%.

Financial Details

J. C. Penney ended first-quarter fiscal 2018 with cash and cash equivalents of $181 million compared with $363 million at the end of the year-ago quarter. Meanwhile, long-term debt came in at $4,142 million, up from $4,066 million in the year-ago period. Shareholders’ equity totaled $1,315 million at the end of quarter. Merchandise inventory levels decreased 1.4% to $2,948 million.

This Zacks Rank #4 (Sell) company reported negative free cash flow of $421 million compared with negative free cash flow of $293 million in the prior-year quarter. Further, it incurred capital expenditures of $106 million up from $83 million in the year-earlier quarter.

2018 Outlook

For fiscal 2018, the comps are projected in the range of flat to up 2%. The company now expects adjusted bottom line in the range from a loss of 7 cents to earnings of 13 cents a share. The company had earlier guided adjusted earnings per share of 5-25 cents. The Zacks Consensus Estimate for fiscal 2018 is currently pegged at earnings of 14 cents, which could witness a downward revision in the coming days.

For second-quarter fiscal 2018, the company expects comps in the middle of the annual guidance range. Further, cost of goods sold and SG&A expenses are likely to decrease. 

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Nordstrom (JWN - Free Report) delivered an average positive earnings surprise of 16.8% in the trailing four quarters. The company has a long-term earnings growth rate of 6% and carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Best Buy (BBY - Free Report) delivered an average positive earnings surprise of 19.1% in the trailing four quarters. It has a long-term earnings growth rate of 14.6% and carries a Zacks Rank #2.

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