JC Penney still hurting, but investors have hope
The company posts terrible quarterly numbers, but the CEO urges traders to keep the faith.
It looks like investors are putting their faith in CEO Ron Johnson, who admitted that he made some mistakes this year but said the company is still on track with its transformation. He promised the company would "stay the course."
Johnson said traffic is getting better, and he has hopes for a solid holiday season.
Post continues below.
He makes it sound like JC Penney has turned a corner, and investors seem to be buying it. And now some think the stock, down 34% so far this year, is undervalued.
The numbers alone paint a picture of a company in bad shape. Sales at established stores (those open more than a year) fell 22%, a pretty shocking plunge, and online sales fell 33%. Overall sales were down 23% to $3.02 billion.
Penney also reported a loss of $147 million, or 67 cents a share, from a profit of $14 million, or 7 cents a share, a year earlier. Excluding one-time expenses and other items, the loss was 37 cents per share. Analysts were expecting a loss of 26 cents.
Part of the reason was that Penney shut down its marketing engine in the middle of the quarter, which ended July 28. Johnson realized that people were confused by the pricing initiatives, so the company canceled its advertising campaigns and stepped back to rethink strategy.
It decided on a new pricing policy. It's now going to make dramatic, permanent price cuts throughout much of the store, and it's getting rid of the monthlong bursts of sales it previously used. Johnson described it as simplifying the pricing. "Early response to these efforts has been very encouraging," he said in a call with analysts.
It's not getting better yet. In fact, Penney withdrew its earnings guidance for the year, saying it won't meet its previous earnings target of $2.16 a share, but didn't give more details.
You'd think it would all be enough to send investors fleeing for the exits. But they're sticking around, just in case Johnson is right.
"I am completely confident that our transformation is on track," he said, according to The Associated Press. "But it is very clear that withdrawing from our promotional model to a more everyday model has been harder than we anticipated."
Well, the new catalog needs to go. I rather see advertisements in the paper. The new catalog, it goes right from the mail box to the garbage can.
Have not been in Penneys for some month.
I've got an idea! How about we all stop thinking about who everyone is sexually attracted to and get back to living our lives again! Thanks!
I checked online to make sure of the available stock of an item. Online said it was in stock the store I preferred to shop....1/2 hour away. When I got there, you guessed it, none of the sales persons could locate the item.....They did not even have a display for the cuffed pants as they always had. Needless to say, we went straight to the manufacturer and purchased 4 prs of men's cuffed Dockers.
J C Penney's new catalogs need to go. What ever happened to the REAL catalog that had everything in it that JC Penney's sold? Several of us are for going back to the REAL catalog!
I hope that JC Penney comes back stronger than ever. My family shops there regularly. I have noticed at my local store that the number of customer service stations (checkouts) has been reduced and there is less merchandise in the stores. I personally liked the previous method of offering great sales - maybe the new pricing policy puts my family in a better position, but there's that psychological feeling that I'm getting a better deal when I see that it's "on sale."
It saddens me to see the negativity around JCP's attempts to attract a more diverse population of shoppers. I'm sure that there were similar opinions voiced when the first black model was displayed in one of their flyers. Luckily, back then there wasn't the same easy ability to spew their bigoted hate.
This doesn't surprise me except for the fact that stocks are up? With the new pricing method, I have quit shopping Penney's. The prices are marked up quite high and the way they are marketing the booklet once a month is more confusing to me than any sale brochure. If they are going to go to a single pricing mode, they need to make the prices the same as their old sale brochures. Very disappointed with the direction of this company!
I was just at JCPenny and I buy most of my family's clothes there. I'd hate to see it close, but I and my family think the magazines coming to the house are completely useless and a huge waste of money!!! My Mom says, "Just put a small ad in the Sunday paper and stop the magazine, we just throw it away".
JCPenny has great clothes at a great value. My family will continue to shop there!
For me, I rarely shop at my local Penneys anymore simply because it has not been updated in 20 years or more. Same layout, same lighting, it feels dated and dingy. And that reflects on the perceive value of their merchandise. A more modern store with better lighting, higher ceilings and more open space would go a long way toward making Penneys not seem like a throwback to the 80s'.
Copyright © 2014 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
An interest rate tease in The Wall Street Journal sends the market into an optimistic tizzy -- but one that doesn't end quite at the top.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.