Department-store operator J.C. Penney Co., Inc. (JCP) said Tuesday after the markets closed that it swung to a first quarter loss, hurt by lower sales as well as inventory markdowns and restructuring charges.
The company's top line and its bottom line both missed analysts' estimates by huge margins. The company also said it will discontinue its quarterly dividend.
"Sales and profitability have been tougher than anticipated during the first 13 weeks, but the transformation is ahead of schedule," said Ron Johnson, chief executive officer of J.C. Penney.
J.C. Penney shares are currently losing 10.71% in after hours trading after closing the day's regular trading session at $33.32, down 22 cents. The shares trade in a 52-week range of $23.44 to $43.18.
J.C. Penney is in the midst of a major restructuring under Johnson, a former Apple Inc. (AAPL) executive. To better compete with rivals, the company in January announced a revamp plan, which includes a new pricing structure, monthly promotions and changes in merchandise mix.
In April, the company said it has issued termination notice to about 1,000 employees, mainly in the company's headquarters in Plano, Texas, and its Pittsburgh, Pennsylvania customer call center, as part of its restructuring and cost-cutting plan. Johnson said at that time that the company would henceforth work like a start up and would adopt a management style based on leadership.
The company also recently appointed a new chief finacial officer, Ken Hannah, and a chief supply chain officer, John Singleton.
For the first quarter ended April 28, 2012, the Plano, Texas-based company reported a net loss of $163 million or $0.75 per share, compared to net income of $64 million or $0.28 per share for the year-ago quarter.
Excluding markdowns taken as a result of the company's continuing efforts to reduce inventory levels to align with its new strategy, restructuring and management transition charges and non-cash qualified pension expense, adjusted net loss for the latest quarter was $55 million or $0.25 per share.
On average, 14 analysts polled by Thomson Reuters expected the company to report a loss of $0.10 per share for the first quarter. Analysts' estimates typically exclude special items.
Gross margin for the first quarter decreased to 37.6% from 40.5% a year earlier, hurt by lower than expected sales and the impact of taking deeper seasonal markdowns to clear inventory coming out of the fourth quarter.
Total sales for the first quarter fell 20.1% to $3.15 billion from $3.94 billion in the same quarter last year. Fifteen analysts had a consensus revenue estimate of $3.48 billion for the first quarter.
Same-store sales for the quarter slipped 18.9%, while Internet sales for the quarter dropped 27.9% to $271 million.
Additionally, J.C. Penney said that it will discontinue the $0.20 per share quarterly dividend to save about $175 million in cash annually, which will be used to help fund its broad-based transformation plan announced in January.
As the company expects to take additional restructuring charges and inventory write-downs, it no longer expects to meet its annual earnings guidance of $1.59 per share, but affirmed its adjusted earnings guidance of $2.16 per share. Analysts currently expect the company to earn $1.53 per share for the current fiscal year.
Rival Macy's Inc. (M) last week reported a 38% rise in first quarter profit, reflecting higher same-store sales and a surge in online sales. The company also reiterated its full year earnings outlook.
Another major rival Kohl's Corp. (KSS) last week reported first quarter profit that fell 23% from last year, as it slashed prices on hopes of luring customers. The company offered a gloomy outlook for the current quarter, but continues to see full year earnings above market estimates.
Earlier Tuesday, TJX Companies, Inc. (TJX) reported a 58% jump in first quarter profit, helped by higher sales and improved margins. the company also raised its annual earnings forecast.
by RTT Staff Writer
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