J.C. Penney Friday saw shares topple 12% on news that Q1 sales were down and that it muted its profit guidance for the year. Q1 same-store fell 0.4%, compared to an expected gain of 3.2% reported by FactSet.
The retailer reported an adjusted loss of 32 cents per share on revenue of $2.81 billion, besting analysts' expectations of a loss of 38 cents per share on revenue of $2.92 billion.
The retailer reiterated that same-store sales would rise 3% to 4% for its full-year guidance, but lowered its full-year gross margin guidance to a 10 to 30 basis points increase due to the costs of its appliance move and of the growth in online sales.
J.C. Penney has joined the grim retailer parade of missed expectations and falling sales rolling past in recent days, an indication that the mall-based, brick-and-mortar retail paradigm may be permanently damaged. That, or that apparel is not the profits-rich category that it once was.
“We know we must continue to pivot our merchandise assortment to less weather-sensitive categories,” CEO Marvin Ellison said Friday on a conference call with analysts, as reported by CNBC.
That’s why the retailer is expanding its successful Sephora concessions to 60 more stores nationwide, and why it has decided to re-enter the appliance business it left more than three decades ago. In any case, Ellison said Friday that the retailer's turnaround is "on track."
"While our first quarter sales were below our expectations, we are maintaining our annual comp guidance of 3% to 4% as a result of the positive nature of our recent sales trends, the strength of our Sephora business and our decision to accelerate our appliance rollout," Ellison said in a statement. "Having said that, we remain confident that our turnaround remains on track, and we are excited about our 2016 sales drivers including new Sephora locations, center core enhancements and our nationwide rollout of major appliances announced earlier this week. Accordingly, we are reaffirming our $1 billion in EBITDA for 2016."