Department store operator J.C. Penney posted a 51 percent drop in fourth quarter profit on Friday, and said its loss in the current quarter would be deeper than Wall Street estimates as shoppers hold off on spending.
The most recent quarter's results were better than analysts expected, helped by efforts to cut inventory and expenses amid the weakest holiday shopping season in nearly four decades.
Penney said it intends to gain market share despite the bleak outlook for 2009 by touting unique brands and winning over customers who used to shop at competitors that have since gone bankrupt, like Mervyn's and Linens 'n Things.
"This is truly a time of the survival of the fittest in retailing," said Chief Executive Officer Myron "Mike" Ullman, on a call with analysts.
Net profit fell to $211 million, or 95 cents per share, from $430 million, or $1.93 per share, a year ago.
Earnings were 94 cents per share from continuing operations, topping analysts' average estimate of 92 cents per share, according to Reuters Estimates.
The company forecast a loss of 20 cents to 30 cents per share in the first quarter on sales expected to fall 10 percent to 13 percent. Analysts were expecting a loss of 18 cents per share on revenue of $3.76 billion in the first quarter.
Penney also canceled its annual analyst meeting in Plano, Texas, in April, citing the recession's impact on many firms' travel budgets. Members of senior management will meet with analysts and investors in New York on April 22 instead.
Sales Off as Customers Pull Back
Department store operators, including Penney, Kohl's, Macy's and Saks, have been hit hard by the recession as customers make fewer trips to the mall and avoid splurging on clothes, jewelry and home decor.
"Mall traffic still continues to be down 6, 7, 8 percent a week," Ullman said. "But also when you get in the store, conversion is still under pressure. So the customer is very tentative. They're buying what they need, and they're being smart about how they spend their money."
Penney's net sales fell nearly 10 percent to $5.76 billion, hurt by deep discounts and consumers shunning discretionary purchases. Same-store sales fell 10.8 percent.
Ullman said sales were strong in shoes, women's clothing and at its Sephora cosmetic centers, but weaker in its jewelry and home businesses.
Penney has been stocking its stores with a wide array of private or exclusive brands, like nicole by Nicole Miller and Fabulosity by Kimora Lee Simmons. Ullman said he believes the retailer is taking market share in women's clothing.
The company's shares were up, hovering near $15 in trading on Friday the New York Stock Exchange.