J.C. Penney cuts 360 jobs as sales miss
- J.C. Penney on Friday said total sales in the fourth quarter rose 1.8% year over year to $4.03 billion, and comparable sales rose 2.6% in the period. Top-performing divisions in Q4 were jewelry, home, Sephora, footwear and handbags, and salon, according to a company release.
- Net income was $254 million, or 81 cents per share. That figure includes a $75 million tax benefit J.C. Penney logged for the quarter after last year's Republican tax bill. Without the benefit, net income in Q4 was $179 million, or 57 cents per share, a 6.6% drop from the year-ago period. Earnings beat the FactSet consensus estimate cited by MarketWatch of 47 cents per share, but sales missed the consensus by $20 million and same-stores missed by 0.1%. Shares of the department store retailer were down more than 10% in premarket trading.
- Also on Friday, the retailer said it has eliminated more than 350 jobs, including 130 positions from its home office and another 230 from its group, regional and support teams, while the company moved other employees into different positions. The company said in a press release that the move "eliminated bureaucracy" and would save $20 million to $25 million per year. J.C. Penney also said it moved Joe McFarland, vice president of stores, into an expanded role as executive vice president and chief customer officer, where he will oversee merchandising and store operations.
A healthy holiday showing did not make J.C. Penney's turnaround work much, if any, easier.
For the full year, J.C. Penney made net sales of $12.51 billion, down 0.3% from the year before, mainly because of store closures in 2017, according to the company. Comps for the year were just above flat, increasing 0.1%. The retailer posted a loss of 37 cents per share for the year, due mainly to restructuring charges from store closures.
For 2018, the company said it expects comps to be flat or to increase up to 2%. It's also projecting weak, but positive, earnings of 5 cents to 25 cents per share.
That's not much, after more than a year of closing stores and slashing jobs. (The 360 jobs the retailer just announced it cut come on top of another 670 jobs eliminated as it shut down a distribution center last month.)
The retailer has been under pressure for some time, and it closed out the year with a shakeup in its executive offices, letting go of longtime chief merchant John Tighe (and axing that position completely) in order to "streamline decision-making and promote greater agility within its merchandise buying teams."
Earlier in the year, the company attempted a drastic reset and swept away much of its women's inventory as it warned of a critical sales slump in the third quarter. CEO Marvin Ellison said of Q3 that gross margins and earnings "exceeded our expectations," and even apparel sales improved.
The holiday period was brighter still, but the higher traffic and same-store sales rise may not be sustainable, GlobalData Retail analyst Anthony Riva warned earlier this year. "JCP has a lot more work to do in reenergizing its proposition across 2018 to give people reasons to visit."
In the long-run, J.C. Penney and its peers face steep existential challenges. Mass merchants have been cutting into their share for years. Amazon and other online players have been stealing apparel sales. And off-price sellers have been growing, as customers seek out steep discounts and "treasure hunt" thrills. That growth has and will likely continue to come at the cost of department store sales, including at J.C. Penney, which likely means that 2018 will be something of an uphill climb for the retailer.
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