JC Penney Adds to the Misery in Retail; Sales Fade

NEW YORK (AP) -
(AP Photo/Mark Lennihan, File)
(AP Photo/Mark Lennihan, File)

Shares of J.C. Penney tumbled Friday after the department-store chain reported a surprise drop in its first-quarter sales, joining a slew of others who muddled through a miserable spring.

Department stores including Macy’s, Nordstrom and Kohl’s have all reported weak sales results this week that revealed how drastically business has fallen off since mid-March. Many analysts believe it is because of a confluence of factors, from temporary ones like unseasonably cool spring weather to more permanent shifts in spending and preferences. Shoppers are continuing to shift away from clothing and more toward services and experiences. Analysts also point to the growing dominance of Amazon.com, which is sapping traffic from America’s malls.

The latest government retail sales for April, released Friday, show that gains were fueled by online spending and automobile purchases.

The overall tough times come as J.C. Penney is clawing its way back after a catastrophic reinvention plan under former CEO Ron Johnson sent sales and profits into a free fall in 2012 and 2013. Business had stabilized, though it has yet to fully recover.

Under its CEO Marvin R. Ellison, the department store is looking for new ways to increase sales while playing catch up in e-commerce. Ellison told investors Friday that it’s looking to decrease its overall apparel business while shifting to areas where shoppers are increasingly spending their money, including categories like appliances and other services.

Penney is getting back in the appliance business in nearly 500 stores, almost half of the locations, this summer. Penney got out of the major appliance business more than 30 years ago. That could be a big opportunity. Stores like Home Depot have avoided the retail funk thanks to a strong housing market.

But a challenging environment in other areas of retail could stall any momentum J.C. Penney has.

The department-store chain reported a decline in same-store sales, 0.4 percent, reversing five straight quarters of growth. Analysts had expected an increase of about 3 percent.

The company, based in Plano, Texas, lost $68 million, or 22 cents per share, for the three-month period ended April 30. That compares with a loss of $150 million, or 49 cents per share, in the year-ago period.

Revenue dropped 1.6 percent to $2.81 billion.

Analysts were expecting a loss of 38 cents on revenue of $2.92 billion, according to FactSet.

Penney still expects same-store sales to rise 3 percent to 4 percent for the year. Ellison told analysts on the conference call that strong sales over Mother’s Day provided confidence to keep its outlook intact. But it pared down its gross margin estimates for 2016 due to the expenses it will occur in the rollout of its appliance business, and also rapid growth for its online business.

In trading Friday afternoon, JC Penney shares were down 16 cents, or 2.1 percent, to $7.64.