JCPenney cuts losses, plans to start selling used clothing
Shares of J.C. Penney surged after the ailing department store cut its quarterly losses in half and announced that it would begin selling used clothing to staunch fading sales.
Retailers have been searching for ways to get people back into its stores in the decade since the global economic downturn altered consumer behavior, a period that has run parallel with the ascent of Amazon.com.
Among the worst hit has been J.C. Penney, a company that traces its roots back to 1902 and just received a delisting warning from the New York Stock Exchange because its shares have fallen below $1.
On Thursday, the Plano, Texas, company said it would be partnering with thredUP, a resale website where people can buy and sell clothes online. J.C. Penney will open threadUP shop in 30 stores soon.
“We are not simply running a business — we are rebuilding a business,” said CEO Jill Soltau said in a prepared statement. “We are making a difference and today, I feel more confident than ever that we will reinvigorate and rejuvenate this great company to sustainable, profitable growth.”
It would not be the first time the company has shifted in unexpected directions, notably and disastrously under former Apple executive Ron Johnson.
But the company needs to find a way to turn things around.
Sales at established stores, a crucial measure of a retailer’s health, have eroded steadily. Same store sales tumbled 9% in the second quarter, or 6% when the impact of the company’s exit from major appliance and in-store furniture sales are accounted for.
The decision to bring appliances and furniture back into stores did not generate the traffic or sales it has hoped.
The company was able to clear troublesome levels of inventory. J.C. Penney said Thursday that inventory declined 12.5%, to $2.47 billion and it reported an improvement in cost of goods sold.
For the three months ended August 3, J.C. Penney Co. lost $48 million, or 15 cents per share.
Excluding certain items, it lost 18 cents per share. That’s much better than the loss of 32 cents per share analysts surveyed by Zacks Investment Research expected.
Shares jumped 6%.
But the company got a $5 million boost from tax benefits.
Neil Saunders, managing director of GlobalData Retail, said the company is losing money because most stores lack energy and exciting products.
“The net loss of $43 million on the bottom line reflects this dynamic and brings total losses in the year to date to $196 million,” Saunders wrote to clients. “The magnitude of these losses underline that JC Penney is not only in a bad place from a proposition point of view, but that it has very little financial room for maneuver.”
While it was still a loss, it was a substantially better quarter than last year, when the Plano, Texas-based company reported losses of $101 million.
Revenue declined in the most recent quarter to $2.62 billion from $2.83 billion.
Another struggling department store, Macy’s, cut its expectations for the year on Wednesday and fell far short of Wall Street’s profit expectations.
It too announced a partnership with threadUP to sell used clothing.