Penney's Sales Fall, Outlook Improves -- WSJ

Date : 11/16/2019 @ 8:02AM
Source : Dow Jones News
Stock : Walmart Inc (WMT)
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Penney's Sales Fall, Outlook Improves -- WSJ

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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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