J.C. Penney reported mixed second-quarter results Thursday as sales eroded faster than expected and the department store chain struggled under the weight of its debt.
Penney reported a net loss of $48 million, or 15 cents a share, narrower than its loss of $101 million, or 32 cents a share, a year earlier. Excluding one-time items, Penney lost 18 cents a share, compared with analysts' forecasts of a loss of 31 cents, according to Refinitiv.Â
Despite the smaller loss, sales fell more than had been anticipated. Revenue for the quarter ended Aug. 3 sank 7.4% to $2.62 billion from $2.8 billion a year earlier. That was lower than analyst expectations of $2.69 billion.
Sales at Penney stores open for at least a year were down 9%, worse than an expected drop of 5.2% percent. The company said sales were driven lower because it has stopped selling appliances and furniture in its stores. Both are expensive categories. It was among a series of closely watched decisions aimed at turning the company around, made by its CEO Jill Soltau, who joined the company 10 months ago.
Soltau also has been closing stores. Penney said it has shuttered 15 of the 18 full-line stores it announced it would close in 2019, and all nine of the home and furniture locations.
The company reported making $17 million in operating profits this quarter, but is burdened by around $4 billion in debt that it's working with advisors to restructure. That debt overhang, which included a $74 million interest expense, makes it difficult for the cash-strapped company to fund improvements to keep up with competitors. Penney said it ended the quarter with $1.7 billion in liquidity, and expects liquidity to remain at least $1.5 billion for the year.
The retailer said it was able to cut its inventory by 12.5% in the second quarter, and that lower permanent markdowns led to an improvement in the cost of goods sold.
Department stores have been under pressure as consumers head to shopping malls less frequently and shift more purchases online. Brands that once only sold through department stores such as Michael Kors or Nike are increasingly selling directly to consumers either in their own stores, at outlets or online.Â
On Thursday, Soltau also announced a partnership with secondhand retailer ThredUp. Rival Macy's said it would pair up with the online retailer a day earlier.
In February, J.C. Penney shut down its attempt at a men's styling subscription service in collaboration with Bombfell.com.
Tariffs have also been a threat to retailers. Penney said that it has less exposure than some of its competitors, because the company has diversified where its products originate from.
Last week, the company received notice that it was at risk of being delisted from the New York Stock Exchange. Its stock fell below $1 on July 19 and has been trading below that level ever since. On Wednesday, it hit an all-time low of 53 cents. In trading Thursday, shares were more than 8% higher, trading at round 62 cents. The company said it plans to increase its share price through improvements in its operating performance or other revenue.
Through Wednesday's close, shares of the company have been down more than 37% since January, bringing it to a market value of about $181 million.
