JC Penney shares nosedive after 2Q earnings miss and lower forecast thanks to inventory pileup

Shares of JC Penney Company Inc (NYSE:JCP) fell off a precipice Thursday after the department store chain reported second-quarter earnings and revenue that missed analysts’ expectations, as it continues to grapple with unsold merchandise.

For the quarter ended June 2018, JC Penney reported a loss of US$0.38 per share on revenue of US$2.8bn. This was a wider-than-expected deficit with analysts calling for a loss of US$0.08 per share on revenue of US$2.9bn. Revenue fell 4.5% compared to the same quarter a year ago.

JC Penney stock tumbled 26.14% to US$1.78

Investors were particularly spooked as the retailer reduced its outlook dramatically for fiscal 2018, saying it now expects an adjusted loss per share of US$1 to US$0.80 and same-store sales to be flat.

The company’s previous guidance was for results to range from a loss of US$0.07 per share to earnings of US$0.13 per share. The consensus estimate is for earnings of $0.03 per share for the year ending January 31, 2019. 

JC Penney like most of its department store peers has struggled to compete in the quickly evolving retail landscape as consumers shift their shopping online.

The company said it would take “necessary actions” to right-size its inventory and “better curate” its assortment.

“This quarter we adjusted our approach to inventory management from ‘buying to store capacity’ to ‘buying and chasing’ into demonstrated sales trends. Inventory receipts continued to outpace total sales performance this quarter due to prior purchase commitments,” said JC Penney CFO Jeffrey Davis. 

“We took actions to markdown and clear excessive inventory positions across many of our categories, which encompasses more than just seasonal product or fashion misses. Consequently, we are reducing our earnings guidance for fiscal 2018,” he added.

As fast fashion brands have trained shoppers to shop new styles more frequently, retailers like JC Penney have struggled to build a supply chain to support quick inventory changes.

Contact Uttara Choudhury at [email protected]

Follow her on Twitter: @UttaraProactive 

Story by ProactiveInvestors