JC Penney’s strong 4Q profit doesn’t impress

Surprisingly strong fourth-quarter earnings by J.C. Penney Co. are being overshadowed by revenue and comparable-store sales that came in a tad light during the critical holiday season.

The retailer also offered a muted annual profit outlook, sending shares lower in premarket trading Friday.

Penney said it eliminated 130 positions across all departments in its headquarters in Plano, Texas. In addition, Penney said it restructured its regional, district and store support teams to eliminate bureaucracy. That move resulted in an additional 230 positions eliminated. The company estimated the annual cost savings generated from the home office and store reorganization is about $20 million to $25 million. The company also announced some executive changes including the appointment of Joe McFarland as executive vice president and chief customer offering in a newly expanded role.

“It is imperative that we maintain a thoughtful approach to managing expenses, while effectively supporting the needs of the business,” said Marvin Ellison, CEO of J.C. Penney, in a statement.

J.C. Penney, like many department stores, has wrestled with shoppers shifting more of their spending online. Department stores, which are heavily dependent on clothing sales, are seeing more competition there as Amazon.com expands further into fashion and off-price chains like T.J. Maxx add more stores.

However, this holiday season, an improving economy and the highest consumer confidence since 2000 helped to perk up sales at many stores including department store chains.

Kohl’s enjoyed a 6 percent increase in sales at established stores, its largest such gain since 2001. Business was helped by more customers both coming into the stores and shopping online. Its profit also was better than expected as it offered fewer discounts. Kohl’s, based in Menomonee Falls, Wisconsin, also said Thursday it has teamed up with no-frills grocery chain Aldi to lease space in five to 10 stores.

Nordstrom, which has said that members of the founding family are looking into a buyout of the department store chain, reported profits and overall revenue Thursday that fell short of expectations for the quarter that includes the holiday season. The missed targets overshadowed Nordstrom’s healthy 2.6 percent increase in sales at established stores, which is a key measure of a retailer’s health.

Macy’s reported earlier this week that it broke out of an almost three-year sales slump, reporting a healthy sales gain at existing stores for the holiday period as it benefited from an improving economy and its own initiatives like an overhauled customer loyalty program. The department store chain also posted sharply higher earnings for the fourth quarter, boosted by the sale of certain real estate assets. It issued an upbeat outlook.

J.C. Penney, though, has had extra challenges in restoring sales after a disastrous attempt to reinvent the company under former Apple executive Ron Johnson. The company has since brought back major appliances like dishwashers and has expanded its in-store Sephora beauty shops.

This past holiday season, J.C. Penney created toy shops in its stores

The chain is trying to operate as a more “modern company” in a vastly changing landscape — and, in many cases, it’s playing catch-up. The company has acknowledged that it was behind in chasing the active and casual clothing trend, and is using analytics to understand shoppers’ behavior. It’s now expanding those merchandising areas in the store and is highlighting them in visible areas.

The company has also centralized its pricing strategy and late last year eliminated the position of chief merchant

The retailer reported that fourth-quarter earnings rose to $254 million, or 81 cents per share, from $192 million, or 61 cents per share, a year earlier.

Per-share earnings, adjusted for one-time gains and costs, were 57 cents, which is 12 cents better than Wall Street had expected, according to Zacks Investment Research.

Revenue at stores opened at least a year rose 2.6 percent, a tad below expectations for a 2.7 percent increase.

Revenue for the Plano, Texas, company was $4.03 billion, in line with expectations.

J.C. Penney expects full-year earnings in the range of 5 to 25 cents per share with same-store sales flat to up 2 percent. Analysts are expecting earnings per share of 20 cents and comparable sales growth of 0.7 percent, according to FactSet.

Shares fell 10 percent, or 40 cents, to $3.52 per share in premarket trading.


Elements of the story were generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on JCP at https://www.zacks.com/ap/JCP


Follow Anne D’Innocenzio at — https://twitter.com/adinnocenzio

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