J.C. Penney Earnings: Here’s Why Investors Are Selling Shares Now

S&P 500 (NYSE:SPY) component J.C. Penney Company Inc. (NYSE:JCP) swung to a loss in the first quarter, missing analysts’ forecast. J. C. Penney is a holding company that offers merchandise and services to consumers through department stores and direct (Internet/catalog) channels.

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J.C. Penney Company Earnings Cheat Sheet for the First Quarter

Results: Reported a loss of $163 million (75 cents per diluted share) in the quarter. J.C. Penney Company Inc. had a net income of $64 million or 28 cents per share in the year-earlier quarter.

Revenue: Fell 20.1% to $3.15 billion from the year-earlier quarter.

Actual vs. Wall St. Expectations: J.C. Penney Company Inc. reported an adjusted net loss of 25 cents per share. By that measure, the company fell short of the mean analyst estimate of a loss of 9 cents per share. It fell short of the average revenue estimate of $3.48 billion.

Quoting Management: “Sales and profitability have been tougher than anticipated during the first 13 weeks, but the transformation is ahead of schedule. Customers love the new jcp they discover in our stores. Our shop strategy has been applauded by vendor and design partners, our merchants have stepped up to the challenge of improving our merchandise and presentation, we have dramatically simplified our business model and reorganized our teams at headquarters and in our stores. While we have work to do to educate the customer on our pricing strategy and to drive more traffic to our stores, we are confident in our vision to become America’s favorite store. We fully expect that the bold and strategic changes we are making to our operations will result in improved profitability and sustainable growth over the long term,” said Ron Johnson, chief executive officer of jcpenney.

Key Stats:

Last quarter marked the fifth straight quarter that the company saw shrinking gross margins, as gross margin fell 2.8 percentage points to 37.6% from the year-earlier quarter. Over that time, margins have contracted on average 2.8 percentage points per quarter on a year-over-year basis.

Revenue has dropped for four quarters in a row. Revenue declined 4.9% to $5.42 billion in the fourth quarter of the last fiscal year. The figure fell 4.8% in the third quarter of the last fiscal year from the year earlier and dropped 0.8% in the second quarter of the last fiscal year from the year-ago quarter.

The company has fallen short of estimates for two consecutive quarters. In the fourth quarter of the last fiscal year, it missed expectations by 46 cents with net income of 21 cents versus a mean estimate of net income of 67 cents per share.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the second quarter has moved down from a profit of 14 cents a share to a loss of 5 cents over the last ninety days. At $1.65 per share, the average estimate for the fiscal year has fallen from $1.79 ninety days ago.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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