JC Penney still hurting, but investors have hope

The company posts terrible quarterly numbers, but the CEO urges traders to keep the faith.

By Kim Peterson Aug 10, 2012 12:03PM
JC Penney (JCP) posted another bad quarter Friday and chopped its 2012 guidance. So why is the stock up more than 3%?

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."
Tags: JCP
165Comments
Aug 10, 2012 1:12PM
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Bring back the coupons and watch how sales rise.  Once the company ending the coupons, that is when sales dropped.
Aug 10, 2012 3:46PM
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businesses need to stay out of social politcs
Aug 10, 2012 1:58PM
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I'm just not getting the concept of you should eat and shop because they either support not support gay rights. What is wrong with people? Who gives a rat's a**.
Aug 10, 2012 1:27PM
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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.

Aug 10, 2012 2:45PM
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The CEO of JC Penny's is a dreamer.  I stopped shopping at Penny's because I happen to like sales racks and 70% off.  I have seen their prices and believe me they are not low.  He may be able to fool the investors but not the shoppers.
Aug 10, 2012 1:29PM
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People who still think only 3% of the population is attracted to members of the same sex are in MAJOR DENIAL. And people who think not shopping JCP, or eating greasy, heart-attack-inducing chicken is somehow going to bring them social ~justice~ are delusional. Piss off.

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!
Aug 10, 2012 1:04PM
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My last visit to JC Penneys in Charleston, WV remided me of visiting a low-end K-Mart.  Where did all the nice stuff go?  I won't be going back again.
Aug 10, 2012 12:59PM
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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!

Aug 10, 2012 4:08PM
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I use to shop at JC's a lot, but I am finding there clothes have become cheat looking as well as cheaply made. I don't care what they are doing inside there store to make it more delightful for shoppers, it comes down to the quality of there clothing not how nice there store looks.. I'm all for things being made in American once again, this cheap crap is just what it is, cheap crap..
Aug 10, 2012 2:08PM
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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. 

Aug 10, 2012 2:39PM
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why does JCP feel the need to reach out to the gays? They are a retailer, focus on your stores and items for sale. leave the politics out!
Aug 10, 2012 3:58PM
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Dump their CEO and upper management.  Return Penny's to what it once was.  The friggin parking lots are a ghost town disaster every time I drive by one.  I quit going when they jacked up the prices with no deals along with alot of other people I know.  Damn shame.  It was a wonderful store.  My floor used to be full of Penny boxes every Chrismas.  My drapery is all from Penny's.  My small appliances are all Penny's.  My clothing because I am tall is all from Penny's.  The current CEO screwed this store up royally.  I worked in the corporate world for 30 years and saw this coming a long time ago.
Aug 10, 2012 1:16PM
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It's sorta sad that we live in an age where 3 billion in sales is bad news. I get that it's down but still.. 3 f**king billion in sales people.
Aug 10, 2012 5:45PM
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JCP has no one to blame except themselves...unqualified managers...attempting to pressure older employees to retire or quit...the list goes on and on...when yhou hire kids, that's what you get..kids.
Aug 10, 2012 1:11PM
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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!

Aug 10, 2012 4:44PM
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JC Penny killed themselves. They had lines of clothing that were affordable for middle income families but for some reason they over priced their shoppers. If I am going to spend high dollar on clothes I am going to the brands that are in style and not the cheaper made line they sell with the inflated prices. They did away with sales, jacked up prices, and now they are suffering the consequences. Stockholders are fools if they think middle-class will spend top dollar on their overpriced merchandise. Get real look at the economy. I can shop Dillards or Macys on their sale days and get top quality clothing for half the price JC Penny is trying to charge. It seems to me they are trying to put the cost of redoing their stores off on the customer. You lost another I won't be back.
Aug 10, 2012 1:57PM
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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!

Aug 10, 2012 5:05PM
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I USE to shop there when they had good sales and coupons.They tried to be high end and have everyday pricing like Mac'ys, not working.  They need to go back to the way they were, good sales and merchandise.......So many of the moms and  women, I talk with feel the same way, we are the shoppers, so listen. We dont need a fancy floor layoust and overpriced merchandise.....it was fine the way it was...............sometimes change is not good!
Aug 10, 2012 12:46PM
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I blame it on dumb women who care more about the shopping experience then saving money. I bought two pair of pants, same brand same style, before and after the change. I saved over $30.00 with the second purchase. They have a good strategy, but people are too stupid to take advantage.
Aug 10, 2012 2:58PM
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This is the first I'm hearing about some perceived "Gay Agenda" from JC Penney. Seems to me a lot of people need to get over themselves if they change their shopping habits because they don't like that Ellen is the spokesperson of the month.

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'.

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