- J.C. Penney on Thursday reported that third quarter net sales fell 5.8% year over year to $2.65 billion, while comparable-store sales fell 5.4%, according to a press release. The department store retailer's operating loss expanded more than 28% to $100 million, and its net loss expanded by nearly 21% to $151 million.
- Both comps and net sales fell short of FactSet estimates, sending Penney's stock price down nearly 11% in premarket trading, according to MarketWatch. The retailer revised its expectations for the year downward, now expecting a comps decline in the low-single digits, down from previous guidance of flat comps.
- New CEO Jill Soltau said in a statement, "In spite of our overall sales results, I am encouraged by the recent underlying trends in key businesses such as women's apparel, active, special sizes and fine jewelry." She added that the retailer is "taking the necessary steps to right-size our inventory positions to better support the brands and categories that are demonstrating profitable sales growth."
J.C. Penney's new CEO has her work cut out for her. The retailer has been stringing together disappointing quarters at a time when many other traditional retailers have changed their trajectory amid a strong consumer economy.
In her statements to investors, Soltau walked a fine line, noting the time it would take to change Penney and drive profitable growth while acknowledging the need for urgency. About the business broadly, she said, "My commitment is that we will make sound, strategic decisions backed by data, and will always be rooted in delivering on our customers' wants and expectations."
The retailer under former CEO Marvin Ellison, who departed this summer for Lowe's, had nearly dug itself out of the steep hole it fell into under Ellison's predecessor, Ron Johnson, whose tenure was famously disastrous. But while Penney mostly stopped hemorrhaging money and customers under Ellison, it never quite found its way forward. For several quarters running, the retailer has been steeply discounting to clear inventory as it tries to get the calculus on women's apparel right.
Penney has signaled there's more work to do on inventory, which means it still has a way to go before its sales turn around. Which leaves Penney in limbo — in a seemingly endless turnaround. Meanwhile, stronger peers (namely Kohl's, Nordstrom and Macy's) have been posting respectable, if not enviable, sales and profit numbers.
The hope for the company is that Soltau, who came from crafts retailer Joann, can bring her merchandising skills to bear on fixing Penney's women's apparel woes. But the challenge she faces is steep. As Neil Saunders, managing director of GlobalData Retail, said in emailed comments, Penney's Q3 performance in the current positive retail economy is "nothing short of atrocious."
He noted the immediate need for Penney to nail apparel, merchandising and real estate, and to dispense with "random initiatives" that alienate Penney's core customers and instead approach new initiatives with "laser focus."
"This isn't so much as running up a down escalator, it's more akin to running up a super-speed down escalator with slippery oil poured all over it," Saunders said. He added: "Ultimately the jury is out on whether JCP will follow the path of Macy's or Sears — of reinvention [or] terminal decline. The good news is that the business now has a CEO determined to follow the former course and who has the skills required for the journey. However, time is not on her side."