J. C. Penney is back in the red, at least for the month for July.
After reporting a surprise $47 million in net income in June versus a year-ago loss, July’s report came as a disappointment, although perhaps not unexpected for a company that landed itself in bankruptcy court upon filing a voluntary Chapter 11 petition on May 15.
For the month ended Aug. 1, the net loss was $266.0 million, versus the year-ago loss of just $12 million. What’s troubling is the 30.3 percent decline in total revenues to $564 million from $809 million in the comparable year-ago period. Drilling down further on the balance sheet, total net sales fell 29.5 percent to $542 million from $769 million, and credit income and other revenue fell by nearly half at 45 percent to $22 million from $40 million.
With social distancing still in place and Covid-wary consumers not yet thronging the stores, the retailer lost income from its closed photo studios and hair salons, which accounts for other income on the balance sheet. That’s on top of lower sales as stores in states such as California, Texas and Florida saw rising rates of infection and possibly some closures.
But Penney’s operates an online platform, and the lower sales and possible reduction in credit card income suggests the consumer the mass merchant caters to might just be tapped out. Data from nation’s July retail sales indicates that May and June saw higher sales because of the federal government’s stimulus payments, and while sales last month still showed a slight increase, that apparently didn’t apply to Penney’s. With stimulus payments spent and consumers who are out of work also losing their extra federal unemployment benefits as July wound down, there’s a chance the slowdown in sales at Penney’s isn’t going to go away. That of course won’t be known until next month when August sales data is available.
The retailer also has on its balance sheet $1.48 billion in cash, cash equivalents and restricted cash, versus $175 million in the year-ago period. But that growing balance is likely due to rent amounts owed to landlords, but haven’t yet been paid. And that’s probably a sticking point in its sale talks wth potential buyers Simon Property Group and Brookfield Properties, two of its landlords who have teamed up on an offer. Penney’s is trying to secure better rent terms for its leases going forward.
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The retailer also has on its balance sheet $1.48 billion in cash, cash equivalents and restricted cash, versus $175 million in the year-ago period. But that growing balance is likely due to rent amounts owed to landlords that haven’t yet been paid. And that’s probably a sticking point in its sale talks with potential buyers Simon Property Group and Brookfield Properties, two of its landlords who have teamed up on an offer. Penney’s is trying to secure better rent terms for its leases going forward.
The embattled retailer is trying to sell itself, hoping for one more chance for a revival that could give credence to the transformation it claims was underway before the coronavirus crisis brought all of that to a halt. Negotiations are still underway, although there are no guarantees that a deal will be struck, despite everyone’s best efforts to cement a deal and take talk of a liquidation off the table.