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JC Penney's Loss Widens, No Turnaround

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J. C. Penney Company Inc. (JCP - Free Report) once again fell short of expectations, with its turnaround plan failing to deliver the desired results. The company remained in the red with adjusted loss per share of $1.31 in the first quarter of fiscal 2013, dashing all hopes of recovery, at least in the near term.

The loss incurred was wider than the loss of 25 cents in the comparable year-ago quarter. The Zacks Consensus Estimate for the quarter was a loss of $1.16.

Including one-time items, the quarterly loss came in at $1.58 compared with the loss of 75 cents in the prior-year quarter.

J. C. Penney, in a major development, discharged CEO Ron Johnson of his duties and its former CEO, Myron E. (Mike) Ullman, III was reinstated to the helm.

Ron Johnson, who was appointed as the CEO with high expectations, was ousted from his position after serving for 17 months. Within this span, Johnson announced a string of strategic measures to bring the company back on its growth trajectory. Despite the efforts, J. C. Penney’s restructuring initiatives have been crumbling as the company is exhibiting no signs of improvement. Alongside, it is constantly lagging its peers, Macy’s Inc. (M - Free Report) , Target Corporation (TGT - Free Report) and Kohl’s Corporation (KSS - Free Report) in terms of performance.

The company’s quarterly sales of $2,635 million plunged 16.4% year over year and fell short of the Zacks Consensus Estimate of $2,639 million. Comparable store sales decreased 16.6% year over year as overhauling activities at its new home department across 505 stores hindered sales.

J. C. Penney witnessed a 6% decline in traffic, while store conversions edged down 1%. Moreover, average transaction value waned approximately 10% during the quarter as its earlier pricing and marketing strategy weighed upon the results.

Gross profit plummeted 31.5% to $812 million, whereas gross profit margin contracted 680 basis points to 30.8%, signifying lower sales and increased markdowns to clear inventory.

J. C. Penney’s adjusted operating loss significantly widened during the quarter and came in at $389 million compared with an adjusted loss of $48 million in the year-ago quarter.

Stores Update

In the reported the quarter, J. C. Penney added 681 Joe Fresh apparel shops within its stores and plans to add newly designed home departments during the second quarter. For fiscal 2013, the company has 60 Sephora inside jcpenney store openings on its cards. Of these, 30 Sephora shops have been opened in the first quarter.

Other Financial Details

J. C. Penney ended the quarter with cash and cash equivalents of $821 million, long-term debt of $2,868 million and shareholders’ equity of $2,866 million. The company drew $850 million from its $1.85 billion revolving credit facility during the quarter and incurred capital expenditures of $214 million.  

Currently, J. C. Penney holds a Zacks Rank #3 (Hold), which could witness a downgrade in the near term.

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