JC Penney sales rebound, but investors flee
J.C. Penney on Tuesday reported a modest rise in quarterly comparable sales but gave no details on its gross profit margin, leading Wall Street analysts to conclude the department store operator had to resort to bigger discounts during the holiday season.
Still, Penney said it had $2 billion in liquidity available at the end of the quarter, in line with its earlier forecasts, reassuring investors concerned about how much cash it was using up as it attempts to fix its business.
The company's shares, which closed at their lowest level in decades on Monday, dropped 10 percent Tuesday after rising earlier.
Penney's comparable sales—those online and at stores open at least a year—rose 2 percent during the fiscal fourth quarter. That was less than the 4 percent analysts were expecting, according to Thomson Reuters I/B/E/S.
It was the retailer's first three-month period of growth in two years. But it also came a year after Penney reported a 31.7 percent quarterly decline, as the retailer's now-abandoned attempt to go upmarket by ditching coupons and opening in-store boutiques for hip brands failed to catch on with shoppers.
"Keep in mind, however, that comparisons for the chain have been decidedly easy and that JCP likely resorted to very aggressive price promotions," Oppenheimer analyst Brian Nagel wrote in a research note.
Chief Executive Officer Myron Ullman pointed to a tough holiday quarter for retail in general, further hurt by bad weather, but said Penney's turnaround was "on track."
Retailers from Target and Family Dollar Stores to Victoria's Secret parent L Brands have lowered profit forecasts in recent weeks following what analysts said was the most discount-driven holiday season in years.
In 2013, Penney lined up a $2.25 billion financing package and in September sold nearly $800 million in new shares to shore up its finances.
The company last month said it would close 33 of its 1,100 stores and cut 2,000 jobs.