Unable to stanch the fiscal bleeding, J.C. Penney (JCP) is shedding 2,000 jobs and shuttering thirty-three stores in a desperate effort to kickstart revenue.
The mega-retailer, which operates approximately 1,100 stores across the U.S., has found it difficult to recover from the financial spiral it has experienced ever since former CEO Ron Johnson began his tenure.
In a press release, a spokesperson for JCP said, “While it’s always difficult to make a business decision that impacts our valued customers and associates, this important step addresses a strategic priority to improve the profitability of our stores and position JCPenney for future success.”
Nagged by persistent troubles, JCP finally showed signs of renewed vitality for the month of November. Still, many industry analysts expressed disappointment that its gains weren’t more impressive. According to a JCP spokesperson, the retailer increased its sales in November by 10 percent, registering a jump in same-store performance numbers for the second consecutive month. October was also touted by the company as evidence of an increasingly successful turnaround strategy; sales jumped 0.9% for October, a substantial improvement in light of the fact that September suffered a 4% decline. A company spokesperson said that the stronger performance was largely attributable to improved inventory in central private brands as well as an overhaul of the home goods department.
But many retail experts consider their progress haltingly slow, especially given the distance they have to cover to return to profitability. Speaking to Businessweek, Rick Snyder, an analyst at the Maxim Group LLC in New York, opined, “I was expecting double digits and that’s as low in double digits as you can get.” Snyder added that their only hope for JCP to affect a rejuvenation of its once thriving business is to attract considerably more store visits. “Unless they start to get incremental customers in the door, a turnaround will be very difficult. If they don’t get traffic increases, they really have no hope.” JCP provided no data on its store visits for the month of November although it has conceded that traffic was down in October despite a surge in sales, likely meaning they are succeeding in getting fewer shoppers to buy more products.
But others still feel reassured by the news of stimulated sales, especially suppliers addled with concerns that JCP’s increased sales come at the expense of gross margins, which have been hurt by an overhang of inventory from the first two quarters of the fiscal year and steep promotional discounts. Some suppliers who use third-party financing to pay for their deliveries have been confronted by tighter credit, hit by increased surcharges from some factoring companies that do business with JCP. These suppliers have continued to ship to JCP despite the additional costs and increased financial exposure partly because of the expectation that JCP’s sales are in the ascendent.
Still, considerable anxieties remain regarding the snail’s pace of JCP’s rebound back into profitability. Many industry analysts acknowledge that the increased sales are a good sign, but that other metrics are actually more significant portents of JCP’s future viability as a retailer.
JCP reported that it ended the quarter with $1.23 billion in cash, up from last year’s total of $525 million. It continues to carry a substantial debt load, pegged at approximately $5.61 billion.
For the fiscal period ending November 2, JCP endured a staggering $489 million loss, or $1.94 per share, compared to last year’s $123 million loss, or $0.56 per share. Thomson Reuters analysts had expected a better performance, estimating a per share loss of $1.77.
The last fiscal quarter represented the company’s seventh consecutive quarterly net loss. Revenues have been steadily declining from a peak of almost $20 billion in 2007 to about $12 billion last year. In 2012, the company’s net loss was almost one billion dollars.