Time to Bail on J C Penney Stock?
Shares of J C Penney Company Inc (NYSE:JCP) stock are getting hammered this morning, another sign there has been no recovery for the U.S. economy.
J C Penney posted a loss of $68.0 million, or -$0.22 per share. Sales fell far short of expectations. During the first quarter, the retailer generated $2.81 billion, just shy of the projected $2.92 billion analysts were looking for. (Source: “JC Penney Reports a 63% Increase in EBITDA to $176 Million and Reaffirms Full Year EBITDA Guidance Of $1 Billion,” J C Penney Company Inc Investor Relations, May 13, 2016.)
Same-store sales, a measure of revenue growth at stores opened for at least one year, were also weak. This metric declined 0.4%, falling short of analysts’ expectations of a 3.3% increase.
“The first quarter was clearly challenging from a sales perspective,” said CEO Marvin Ellison in a press release accompanying earnings. (Source: Ibid.)
J C Penney stock tanked after the news. As of 9:45 a.m. EST, shares of JCP stock are trading down four percent at $7.50 apiece.
The slowdown in retail is all about excuses. First, retailers said people aren’t shopping because it’s too cold. Now, they’re saying it’s because it’s too warm. This is all a way to rationalize the fact that consumers don’t have the means to shop because they don’t have the income.
When you lose your full-time job and begin working part-time, you have to cut back on all of the extras. People don’t need new clothes—you can get by without buying apparel. That’s exactly what we’re seeing in the financial results of retailers like Macy’s, Inc., Dillard’s, Inc., and Nordstrom, Inc.
J C Penney executives painted a gloomy outlook for the rest of the year. Comparable store sales are expected to increase three to four percent. Competition, though, is expected to remain challenging. Management expects gross margins to increase only 0.1% to 0.3%, down from the original projection of 0.4% to 0.6%.