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Shares of JCPenney are collapsing to the tune of 15% after the company has announced that its missed estimates, is cutting its outlook, and will incur a restructuring charge.There have been super high hopes for JCPenney since it hired retail guru Ron Johnson from Apple.
But it’s taking a bit longer for JOhnson to get cranking than some investors (like Bill Ackman) might like.
Sales of $3.15 billion are below expectations of $3.4 billion.
A loss of 25 cents per share is far worse than the 10 cents that was expected.
LANO, Texas, May 15, 2012 /PRNewswire/ — J. C. Penney Company, Inc. (JCP) today announced financial results for its fiscal quarter ended April 28, 2012. For the quarter, jcpenney reported an adjusted net loss of $55 million or $0.25 per share, excluding markdowns taken as a result of the Company’s continuing efforts to reduce inventory levels to align with its new strategy, restructuring and management transitioncharges and non-cash qualified pension expense. On a GAAP basis, the Company reported a net loss of $163 million or $0.75 per share. A reconciliation of non-GAAP adjusted net loss to the most directly comparable GAAP financial measure is included with this release.
“Sales and profitability have been tougher than anticipated during the first 13 weeks, but the transformation is ahead of schedule. Customers love the new jcp they discover in our stores. Our shop strategy has been applauded by vendor and design partners, our merchants have stepped up to the challenge of improving our merchandise and presentation, we have dramatically simplified our business model and reorganized our teams at headquarters and in our stores. While we have work to do to educate the customer on our pricing strategy and to drive more traffic to our stores, we are confident in our vision to become America’s favourite store. We fully expect that the bold and strategic changes we are making to our operations will result in improved profitability and sustainable growth over the long term,” said Ron Johnson, chief executive officer of jcpenney.
First Quarter Results:
Comparable store sales for the first quarter declined 18.9 per cent. Total sales decreased 20.1 per cent, which includes the effects of the Company’s exit from its outlet business. Internet sales through jcp.com were $271 million in the first quarter, decreasing 27.9 per cent from last year.
Gross margin was 37.6 per cent of sales, compared to 40.5 per cent in the same period last year. Overall, compared to last year, gross margin was impacted by lower than expected sales in the quarter and the impact of taking deeper seasonal markdowns to clear inventory coming out of the fourth quarter of 2011. This also includes the impact of a $53 million markdown reserve taken as a result of the Company’s continuing efforts to reduce inventory levels to align with its new strategy. This reserve had a 170 basis point impact on gross margin; excluding this reserve, gross margin was 39.3 per cent of sales. A reconciliation of non-GAAP adjusted gross margin to the most directly comparable GAAP financial measure is included with this release.
The Company’s SG&A expenses decreased $121 million versus last year’s first quarter. Based on the pace of its ongoing efforts to aggressively manage expenses, coupled with additional operational efficiencies that management has identified, the Company now expects savings to accelerate and exceed the run rate of approximately $900 million at the end of 2012, one year earlier than it had previously announced.
For the first quarter, the Company incurred $76 million in restructuring and management transition charges. These charges comprised the following:
- Home office and stores $45 million, or $0.13 per share;
- Leadership transition $20 million, or $0.05 per share;
- Supply chain $6 million, or $0.02 per share; and
- Miscellaneous $5 million or $0.01 per share.
The Company anticipates it will incur additional restructuring charges throughout the fiscal year as it takes aggressive action to further simplify its operations and its infrastructure. In addition, as the Company continues to transform its merchandise assortment to align with its new strategy, the Company may incur additional inventory write-downs as it exits certain lines of merchandise. As a result of these impacts, the Company no longer expects to meet its annual GAAP earnings guidance of $1.59 per share, but affirms its non-GAAP earnings guidance of $2.16 per share which excludes non-cash qualified pension expense, restructuring charges and markdown reserves as we transition our merchandise assortment.
Additionally, the Company announced today that it will discontinue the $0.20 per share quarterly dividend. On an annual basis, this will result in cash savings of approximately $175 million, which will be used to help fund the broad-based transformation plan that jcpenney announced in January.
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