J.C. Penney Co. Inc. said on Friday that sales at its stores open at least a year had fallen 1.8 per cent in the holiday quarter, contributing to a sharp drop in its gross profit margin.
For the fourth quarter ended on Jan. 28, Penney reported a net loss of $87-million (U.S.), or 41 cents per share, compared with a year-earlier profit of $271-million, or $1.13 per share.
Gross margin fell 7.4 percentage points to 30.2 per cent, hurt by weak sales that prompted the department store chain to cut prices.
Earlier this month, Penney announced a new strategy that eschews the short-term discounts it was long known for in favor of lower but consistent prices. The retailer wants to wean shoppers off discounts, which over the years have eaten into gross profit without preventing a loss of market share.
Efforts to implement the new pricing and promotional strategy hit earnings by 59 cents per share, Penney said.
Overall sales fell 4.9 per cent to $5.43-billion, hurt by Penney’s exit from its catalog business.
Penney reiterated its forecast of an adjusted profit of $2.16 per share this fiscal year. But the 1,100-store chain did not give a sales forecast.
Analysts expressed concern that Penney could lose some shoppers who are accustomed to deals.
Mid-tier chains such as Penney and its most direct rival, Kohl’s Corp., found themselves squeezed between higher-end retailers like Macy’s Inc, which drew more affluent shoppers, and companies like Target Corp and Wal-Mart Stores Inc., which attracted shoppers on a budget.
On Thursday, Kohl’s also reported a holiday-quarter fall in same-store sales. The company expects comparable sales to rise 2 per cent this year.
Penney shares were down 0.2 per cent at $41.85 in trading before the market opened