JC Penney's stock tumbles on revenue miss for the holiday quarter

Key Points
  • J.C. Penney's revenue and same-store sales for the holiday quarter fall short of analysts' expectations.
  • The company reports less promotional activity, but online sales hampered profit margins.
  • Penney also announces staff cuts that it hopes will save it up to $25 million a year.
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J.C. Penney on Friday reported revenue and same-store sales for the holiday quarter that fell short of analysts' expectations.

The company saw less promotional activity during the quarter as it shrunk its inventory, but greater online sales hampered profit margins.

Penney also announced a management shakeup and said it is cutting 360 positions, including at its corporate headquarters, to save as much as $25 million a year.

J.C. Penney's stock was down about 12 percent Friday morning on the news.

Here's what the company reported for the fourth quarter ended Feb. 3, compared with what analysts were expecting based on a Thomson Reuters survey:

* Earnings per share: 57 cents, adjusted, vs. 47 cents expected.
* Revenue: $4.03 billion vs. $4.05 billion.
* Same-store sales: 2.6 percent growth vs. an increase of 2.9 percent.

Net income totaled $254 million, or 81 cents a share, compared with $192 million, or 61 cents a share, a year earlier. The company reported a $75 million benefit during the fourth quarter from new U.S. tax legislation.

Excluding one-time items, Penney said it earned 57 cents a share, 10 cents above Street estimates.

Revenue increased 1.8 percent during the period to $4.03 billion, slightly short of analysts' forecast.

Same-store sales, a key metric, rose 2.6 percent, while analysts were calling for 2.9 percent growth.

Penney's ongoing turnaround efforts include liquidating excess apparel inventory, closing unprofitable stores and growing its private-label lines. Last quarter, those investments appeared to be paying off, as Penney's same-store sales climbed nearly 2 percent ahead of the holidays, surpassing analysts' expectations.

On Friday, though, investors feared Penney's latest successes could be waning. Its quarterly results were sharply lower than stronger reports this week from rivals Macy's and Kohl's, and its outlook for the current year was troubling.

Looking to fiscal 2018, Penney said it expects to earn 5 cents to 25 cents per share, largely below analysts' average expectation of 20 cents.

"In 2018, we will intensify our market share efforts in Appliances, Mattresses and Furniture, while continuing to take steps to modernize our apparel assortment and omni-channel," CEO Marvin Ellison said in a statement. Omnichannel is a multichannel approach to shopping that aims to provide shoppers with a seamless experience, whether they're buying online or in stores.

Penney has managed to gain market share of appliances as Sears Holdings closes more stores. It has also seen consistent growth in its beauty department, which includes hair salons, Sephora makeup stores and fine jewelry.

"J.C. Penney is the only retailer that can offer our customers a total beauty solution, combining Sephora, salon and fine jewelry under the same roof," Ellison said Friday on a call with analysts and investors. "This unique beauty experience cannot be replicated online."

To be sure, the company still has other obstacles as a mall-based retailer trying to adjust to sales moving online. Penney recently announced it would be closing one of its distribution centers, eliminating more than 600 jobs. The company has said it will close eight stores in total in 2018, compared with more than 100 closures the year prior.

On Friday, Penney confirmed its plans to cut 130 roles at its corporate headquarters, along with 230 positions from within its stores. Other workers in stores will be reallocated to more customer-facing positions, the company explained, to simplify operations and oversee omnichannel initiatives.

"It is imperative that we maintain a thoughtful approach to managing expenses, while effectively supporting the needs of the business," Ellison said.

Regarding the management changes, the company said Mike Amend, executive vice president of Penney's omnichannel business, is leaving. It said Therace Risch will assume the omnichannel responsibilities as chief information and chief digital officer.

In addition, Joe McFarland will become Penney's chief customer officer and will lead merchandising and store operations. McFarland and Risch will report to Ellison.

Including Friday's losses, J.C. Penney shares have climbed a little more than 8 percent so far this year.