J.C. Penney (JCP) Plunges After Posting a Steep Third Quarter Loss

Retail giant J.C. Penney (JCP: Charts, News) continued its steep slide this week, after the company posted disappointing third quarter earnings that widely missed analyst estimates last week. The Plano, Texas-based company, which is led by former Apple (AAPL: Charts, News) retail head Ron Johnson, posted a net loss of 56 cents per share, or $123 million - a slight improvement from the loss of 67 cents it posted in the prior year quarter.

Excluding one-time benefits, the company posted a far steeper loss of 93 cents per share. Analysts had been expecting a loss of 7 cents per share. Revenue slid 26.6% to $2.93 billion, missing the consensus estimate of $3.29 billion. Daily Chart
E-commerce sales from its jcp.com website also plunged 37.3% to $214 million. Brick-and-mortar operations also fared badly, as same-store sales slid 26.1% during the quarter - compared to a decrease of 1.6% a year ago. Gross profit also dropped 36.1% to $952 million, as its gross profit margin shrunk 490 basis points to 32.5%. The company currently has $525 million in cash, which is heavily outweighed by its long-term debt of $2.9 billion. Its capital expenditures came in at $341 million, creating a negative free cash flow of $389 million. J.C. Penney intends to reduce costs by $900 million by the end of fiscal 2012 to regain positive cash flow and reduce its outstanding debt. J.C. Penney attributed this broad weakness across all segments to lower sales volume and increased markdowns to reduce inventory. During the quarter, J.C. Penney opened seven new J.C. Penney locations and 38 Sephora stores, finishing the quarter with 1,100 stores in the United States and Puerto Rico. J.C. Penney is currently the fourth largest department store corporation in the United States, and has also opened new stores under its Liz Claiborne, Levi's, The Original Arizona Jean Co. and Izod labels. The company's primary competitors are Macy's Inc. (M: Charts, News) and Kohl's Corporation (KSS: Charts, News). Changes under Ron Johnson, who was once lauded as the company's savior due to his experience at Apple, have been slow to pay off. Johnson's plans include new pricing strategies, cost reductions, a redesigned logo and advertising campaign as well as a change in the "customers' shopping experience." Johnson's changes are intended to increase sales volume, which will ideally lead to stronger bottom line growth fueled by expanding margins. J.C. Penney's alarming plunge has yet to shake up its industry peers. Sears Holdings (SHLD: Charts, News), Kohl's and Saks Inc. (SKS: Charts, News) all posted moderate gains after J.C. Penney reported its bleak earnings, leading investors to believe the company is plagued by microeconomic - not macroeconomic - problems. Optimistic investors believe that Black Friday and subsequent holiday sales could boost the company's sales into the end of fiscal 2012. The company trades at 14.1 times forward earnings with a 5-year PEG ratio of 4.54. The stock has dropped 44% over the past twelve months, and does not pay a dividend. Other News About JCP JCPenney's Lost Year: Making Mistakes (And Correcting Them) Can Ron Johnson get J.C. Penney back on track? J.C. Penney to Keep Holiday Sales Will Black Friday boost J.C. Penney's fourth quarter earnings? Other Stocks in the News Apple Inc., HTC Litigation Settled: What's The Implication? Apple and HTC settle their differences. Gilead Sciences Inc. Has Broken Out To A New High On Study Results Gilead finally breaks out after positive study results. Copyright 2012 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA InvestorGuide.com, Inc.) or its employees responsible.

Published on Nov 13, 2012
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

Copyrighted 2016. Content published with author's permission.

Posted in ...