Penney's Sales Fall, Outlook Improves -- WSJ
November 16 2019 - 3:02AM
Dow Jones News
By Suzanne Kapner
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (November 16, 2019).
J.C. Penney Co. reported another quarter of falling sales but
boosted part of its financial outlook for this fiscal year, sending
its battered shares up in Friday trading.
Sales at stores open at least a year fell 9.3% in the three
months to Nov. 2, extending a string of declines. Excluding the
impact from the company's decision to stop selling major appliances
and furniture in its stores, sales would have fallen 6.6%.
The retail chain, once a destination for apparel-hungry
middle-class consumers, has been rocked by rotating managers and
shifting strategies.
"This organization has a lot of problems to fix," Chief
Executive Jill Soltau told analysts on Friday.
Penney continues to struggle as other chains find a path to grow
amid challenges that include rising competition from online
retailers and other upstarts. Walmart Inc. extended its streak of
sales growth to five years in its latest quarter. And on Friday,
the Commerce Department said overall retail sales rebounded in
October, although clothing retailers performed poorly.
Ms. Soltau is testing new strategies in a remodeled store in
Hurst, Texas, that has a fitness studio, a videogame lounge and
style classes. But rolling out those ideas to all of its nearly 850
stores would be a strain on the cash-strapped company, analysts
say.
Penney's net loss for the period narrowed to $93 million,
compared with a $151 million loss a year earlier. Total revenue
fell 8.5% to $2.5 billion.
Analysts worry that Penney has too many stores in weak malls
where foot traffic is declining. But Ms. Soltau said she had no
update on store closures at this time.
"It's not going to be one single action that changes the
trajectory of this organization," Ms. Soltau said. "When we think
about driving traffic, it will be through differentiated products
and services."
But analysts have questioned how the chain would pay for those
improvements. Ms. Soltau said many of the changes were inexpensive
such as adding back employees who merchandise stores in visually
appealing ways, jobs that had been cut under prior management.
Penney said it expects adjusted earnings before interest, taxes,
depreciation and amortization to be over $475 million this fiscal
year. It had been expecting between $440 million and $475
million.
Penney's shares, which are at risk of being delisted from the
New York Stock Exchange, rose 6% Friday morning to $1.17.
The company "finally seems to have a leader that understands
retail and knows the direction the company needs to take," wrote
Neil Saunders, managing director of research firm GlobalData
Retail, in a note to clients.
"However, the question is whether it has the resource and energy
to complete its journey," he wrote.
Multiple ratings firms also recently downgraded the company.
Fitch Ratings in September said there was a "lack of visibility for
a material turnaround" at the retailer. S&P Global Ratings also
lowered its rating in late August, saying the company's "capital
structure appears unsustainable over the long term."
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com
(END) Dow Jones Newswires
November 16, 2019 02:47 ET (07:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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