JCPenney’s fire sales on fall fashions clobber its stock
JCPenney’s stock plunged more than 17 percent after it slashed its financial forecasts, citing slower-than-expected sales in the crucial back-to-school period.
The struggling department store said Friday it got forced into a fire sale to clear unsold fall fashions in September and October.
That, in turn, will fuel a third-quarter loss between 40 cents and 45 cents a share, versus Wall Street’s expectation of an 18-cent-per-share loss. Comparable sales — or sales at stores open at least a year — will inch up by less than a percentage point, Penney said.
“We made the strategic decision to accelerate a wider transformation of the entire women’s department by clearing slow-moving inventory primarily in women’s and other apparel categories,” Chief Executive Marvin Ellison said in a statement.
JCPenney shares were recently off 14.5 percent at $3.13.
The clearance sales don’t bode well for the budget-friendly department store, Gordon Haskett analyst Chuck Grom said in a note.
It’s “concerning given it’s the back-to-school period and weather was very favorable,” Grom wrote, adding that JCPenney’s problems are its own and are not reflective of all department stores.
For the full year, the Plano, Texas company expects comparable sales to be down 1 percent or to be flat and for earnings to be an anemic 2 cents to 8 cents a share.
That’s sorely short of Penney’s previous forecast of 40 cents to 65 cents a share, with comparable sales either declining or rising by a percentage point.
In the second quarter, JCPenney closed as many as 127 stores — the largest one-time liquidation in the chain’s history — leaving it with 875 locations.
JCPenney will release its third-quarter results on Nov. 10.