J.C. Penney Co. Inc. (JCP: Quote) reported Friday that it slipped to a loss in its second quarter reflecting higher markdowns and restructuring charges and sharply lower comparable sales. The company's top line missed analysts' estimates.
Looking ahead, the department store chain cautioned that it no longer anticipates achieving its current earnings forecast for fiscal 2012. In pre-market activity, J.C. Penney shares lost $1.60 or 7.24 percent, and are currently trading at $20.50.
Chief Executive Officer Ron Johnson said, "while business continues to be softer than anticipated, we are confident the transformation of jcpenney is on track...Our rock solid balance sheet will support the execution of our transformation and position us for growth beginning in 2013."
For the second quarter, the company slipped to a net loss of $147 million or $0.67 per share from prior year's profit of $14 million or $0.07 per share. The latest quarter results were hurt mainly by charges of $159 million in markdowns, restructuring and management transition.
Adjusted loss, which excluded items, totaled $81 million or $0.37 per share, while prior year's adjusted earnings were $41 million or $0.19 per share. On average, 13 analysts polled by Thomson Reuters expected loss per share of $0.25 for the quarter. Analysts' estimates typically exclude one-time items.
Total net sales plunged 22.6 percent to $3.02 billion from $3.91 billion a year ago, while analysts were looking for revenues of $3.20 billion for the quarter. Total sales included the effects of the company's exit from its outlet business.
Comparable-store sales for the second quarter declined 21.7 percent. Comparable-store sales is a key retail industry performance metric to gauge activity at store locations that have been open for at least a year.
Internet sales through jcp.com fell 32.6 percent, adversely impacted by the company's decision to significantly reduce its marketing activities as it reconsidered its approach to pricing and marketing in time for back to school.
Gross margin for the quarter was 33.2 percent, lower than last year's 38.3 percent, reflecting lower than expected sales and markdowns to clear discontinued inventory in preparation for new product arriving in the fall of 2012. Excluding these transitional markdowns, which lowered gross margin by 340 basis points, adjusted gross margin was 36.6 percent of sales.
J. C. Penney added that its selling, general and administrative expenses fell 15.5 percent, and it continues to expect savings to accelerate and exceed an annual run rate of approximately $900 million at the end of 2012, based on the pace of its ongoing efforts to aggressively manage expenses.
The company ended the second quarter with approximately $888 million in cash and cash equivalents, and expects to end the fiscal year with in excess of $1 billion of cash.
Going ahead, the company no longer expects to achieve its fiscal 2012 adjusted earnings target of $2.16 per share, which was confirmed while announcing its first quarter results back in May.
J.C. Penney's credit rating was downgraded in July by Standard & Poor's Ratings Services, noting that the company's business risk profile is "weak" and its financial risk profile is "highly leveraged".
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by RTT Staff Writer
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