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JC Penney Drops 9% As Earnings, Comps, And Forecast All Disappoint

Friday, November 11, 2016 6:17
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Embattled retailer JC Penney Company Inc (NYSE:JCP) early today posted worse than expected quarterly earnings, as sales in established stores saw an unexpected downturn.

The Plano, Texas-based company reported a Q3 adjusted net loss of $0.21 per share, which is slightly worse than the $0.20 loss that analysts had expected. Revenues fell 1.4% from last year to $2.86 billion, also missing Wall Street’s view of $2.95 billion.

JCP noted that comparable sales in the latest period fell 0.8%, badly missing expectations for a 2% gain. Comparable sales, also known as same-store sales or simply “comps,” are considered a key indicator of a brick and mortar retailer’s health, since they measure the year-over-year performance of stores open at least 12 months.

JC Penney said that its Sephora, Home, Salon and Fine Jewelry segments performed the best in the third quarter, while the Pacific and Northwest saw the strongest performance out of all geographical regions.

On another sour note, the company’s gross margin was 37.2% of sales, down 10 basis points from the year-ago period.

Looking ahead, JCP said it now expects comparable store sales to rise 1% to 2% for the year, down from a prior outlook of +3-4%. Gross margin is now expected to be flat versus 2015, down from a previous forecast of +10 to +30 basis points. JCP left its outlook for full-year EBITDA of $1 billion and adjusted EPS in the positive, while analysts are looking for $0.14 per share for the year.

The company commented via press release:

“We are pleased to see strong sales performance in the growth initiatives we discussed at our most recent analyst meeting. The results of these initiatives are reflected in a positive sales comp in the month of October, driven by over 200 basis points of comp benefit from our 500 new appliance showrooms. We view our October sales results – specifically our acceleration in the last two weeks of the month – and the benefit from appliances as examples of what we expect for the balance of the fourth quarter.”

JC Penney shares fell $0.82 (-9.31%) to $7.99 in premarket trading Friday. Prior to today’s report, JCP had gained 32.28% year-to-date, versus a 6.40% rise in the benchmark S&P 500 index during the same period.

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