Market Overview

J.C. Penney Earnings Fall Short

Friday saw J.C. Penney (NYSE: JCP) report earnings for the full year 2011, and the numbers do not make for happy reading for the company or investors. They came in short of estimates, as well as dropping to a loss.

JCP reported a loss of $87 million (41 cents per diluted share) for 4Q11. J.C. Penney's net income was $271 million or $1.13 per share in 4Q10. The bad news continues too. Revenue fell 4.9% to $5.42 billion from 4Q10.

The company fell short of the analyst estimate consensus of 67 cents per share too. The analysts were expecting revenue to come in at $5.5 billion.

Ron Johnson, J.C. Penney's chief executive officer noted, “We closed the year by spending two days with the Company's key stakeholders to share our ‘blueprint' for becoming America's favorite store. While 2011 was a year of transition at J.C. Penney, 2012 will be a year of transformation. With this in mind, our associate teams worked tirelessly throughout the quarter to get the stores ready for Feb. 1, 2012. I want to thank them for their amazing efforts.”

The last quarter is the fifth consecutive quarter that JCP has seen shrinking gross margins, with the margin falling 7.4 percentage points to 30.2% from the previous year. In that same timeframe, the margins have been reduced by an average of 2.4 percentage points per quarter YoY.

Revenue too has dropped for three successive quarters. In 3Q11, revenue fell 4.8% to $3.99 billion, while that figure dropped 0.8% from the second quarter in the previous year.

Back on February 16, Piper Jaffray said in a research report that it had met with vendors and retailers at the MAGIC trade show in Las Vegas. Changes to J.C. Penney's pricing and merchandising strategies had generated significant interest from both the vendor and retailer community, with both trying to gauge the potential impact on business. “Overall, vendor commentary on J.C. Penney's changes was positive and we expect the 90+ remaining shops to generate a high level of interest from the vendor community. While near-term comp trends could be volatile, we believe declining product costs and in-store and home office efficiencies should drive solid margin expansion in 2012.”

A few days before that, Deutsche Bank said that it has surveyed 200 investors to gauge reaction to the changes made at JCP. Following that, it was sidelined on JCPenney and would prefer to own Macy's (potential NT comp gain opportunities) and Nordstrom (who JCP is trying to emulate to some extent) as better risk/returns at current levels.

For two months, the outlook on JCP has continued to decline. The average estimate for 1Q12 is now 20 cents per share, down from 33 cents. For FY12, the estimate has dropped from $1.55 per share to $1.21 per share.

Posted-In: Earnings News Retail Sales Analyst Ratings Best of Benzinga

 

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