J.C. Penney Co. Inc. is forecasting a fall in same-store sales this year as it prepares for the holiday shopping season, reporting worse-than-expected quarterly results on Thursday that it blamed on heavy discounting aimed at righting the company.
Shares in the troubled department store chain dropped 14 per cent in early trading before recovering to gain almost 3 per cent, as new chief executive Jill Soltau gave the first indications of her plans to turn a profit and avoid becoming the next big U.S. retail casualty.
Sales at J.C. Penney stores open for more than a year fell 5.4 per cent in the quarter ended Nov. 3 versus a 0.6-per-cent decline forecast by analysts, and the company said it would now be down in the low single digits for the full year.
Ms. Soltau, on a conference call with analysts, said the company had discounted heavily in the quarter to clear slow-moving products and would now review the frequency of promotional offers, its online operations and store footprint.
“While this will be a lengthy process, I understand the need for quick action,” she said.
J.C. Penney has struggled for years to excite consumers with its mid-priced range of apparel, with style-conscious millennials instead choosing fast-fashion brands and online stores.
The company, based in Plano, Tex., has also changed strategy several times, alienating its core demographic of middle-aged and older women as it chased younger shoppers.
In the third-quarter results, the company also withdrew its annual earnings forecast, saying it needed to give Ms. Soltau and its interim financial chief more time to assess the business.
“Are they in an immediate danger of filing for bankruptcy? I don’t see that,” said Ken Perkins, the founder of research firm Retail Metrics. “But if they don’t right ship and start to generate positive [comparable-store] sales and positive traffic, it does call it into question.”
A handful of major U.S. retail names have collapsed in the past two years and others, including J.C. Penney, have slashed jobs and closed hundreds of stores.
People familiar with the matter told Reuters on Wednesday that Sears Holdings Corp. was in the process of finalizing US$350-million in critical bankruptcy financing that would keep the retailer open through the holidays.
J.C. Penney lost 52 US cents a share in the quarter, marginally better than expectations of a loss of 56 US cents.