Tuesday, April 1, 2008

JC Penney cuts sales, earnings forecast; shares tumble

NEW YORK (Reuters) — Department store operator J.C. Penney (JCP) on Friday slashed its first-quarter earnings forecast, saying sales through the Easter holiday were below expectations and noting that consumer confidence is at a multi-year low.
Penney's shares fell sharply, dragging down shares of other retailers.

Department store operators that cater to middle-income Americans have been hit hard by the slowdown in consumer spending as these shoppers forgo purchases of clothes, jewelry or home furnishings amid fears of a U.S. recession.

But even upscale department store chains like Nordstrom (JWN) and Neiman Marcus are starting to feel the strain of the spending slowdown.

"J.C. Penney operates in a very challenged part of the retail sector," said Craig Johnson, president of retail consulting firm Customer Growth Partners. "The mid-tier mall-based department stores are the center of the retail sector difficulties. ... They are the bull's eye of it."

FIND MORE STORIES IN: Easter | Nordstrom | JPMorgan | Neiman Marcus | Penney | Craig Johnson | Charles Grom | Customer Growth Partners | Myron
The retailer expects first-quarter earnings of approximately 50 cents a share, compared with its previous view of 75 to 80 cents a share.

It also expects a low-double-digit decline in March sales at stores open at least a year, known as same-store sales, and a high-single-digit decline in same-store sales for the first quarter. Its previous view was for same-store sales in March and the first quarter to decline in the low single digits.

"J.C. Penney counts half of American families as its customers, and they are feeling macro-economic pressures from many areas, including higher energy costs, deteriorating employment trends and significant issues in the housing and credit markets," said Myron "Mike" Ullman, chairman and chief executive.

"The sharp decline in sales is reflective of these trends," he said.

In February, Penney reported a nearly 10% decline in quarterly profit and said there was no clear indication the consumer environment would improve in 2008.

It also posted a 6.7% drop in February sales at stores open at least a year while analysts, on average, were expecting a decline of just 1.9%.

Those disappointing February sales figures prompted JPMorgan analyst Charles Grom to downgrade his rating on the retailer's shares to "neutral" from "overweight," and he said at the time that the company's outlook for its March sales was "too aggressive."

1 comment:

Anonymous said...

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