J.C. Penney starts out a pivotal year under new management with a bigger sales decline and wider loss than analysts expected.
The transformation of 117-year-old Penney, "will take time" said chief executive officer Jill Soltau on a conference call Tuesday, May 21. The Plano, Texas-based company has "made solid progress acting swiftly, but thoughtfully," she said.
Soltau, who joined Penney in October, has been putting her management team together and working to improve Penney's processes. She's been slashing inventories, working on integrating the online and store businesses, cutting down on shrink and revamping merchandise assortments and strategies.
"We are working to reestablish the fundamentals of retail at J.C. Penney, and at the same time, we are building capabilities to satisfy the wants and expectations of our customers," Soltau said. "In everything we do we are putting the customer at the center."
The department store chain posted a first-quarter loss of $154 million, or 48 cents a share, versus a loss of $78 million, or 25 cents a share a year ago. Sales fell 5.6% to $2.44 billion from $2.58 billion last year as the company discontinued its kitchen and laundry appliances. Same-store sales fell 5.5% in the three months ended on May 4.
Analysts surveyed by Refinitiv forecast a loss of 38 cents a share and a same-store sales decline of 4.3% to $2.56 billion.
The company also said Tuesday it has hired Shawn Gensch from Sprouts Farmers Market to be chief customer officer and executive vice president. Gensch, who also spent 10 years at Target, will report directly to Soltau and be responsible for growing and retaining customers and oversee the marketing, advertising, social media, private label brand strategy and public relations. Before working at Sprouts, Gensch was co-founder and CEO at customer loyalty program company, iAMroyalist Inc. Before joining Target in 2003, Gensch worked in finance and started his career at KPMG.
Penney is in the process of closing 18 department stores and 9 free-standing furniture home stores. The company has said the stores will be closing in July and August.
Penney reduced its inventory by 13% last year and Soltau said in February that trimming back merchandise would be an ongoing effort and further reduced inventory by 16% at the end of the first quarter.
The first quarter included the clearance of floor models in the discontinued kitchen and laundry appliance departments in 600 of its 864 stores. Furniture, which will still be sold on jcp.com, was also discontinued in the 105 stores that still sold it. Mattresses are staying and were reconfigured as part of the bed and bath home goods departments. The discontinued appliances represented 2.7% of sales that weren't profitable.
Penney mentioned tariffs in its annual report among a list of developments that could hurt its profitability. Most of Penney's merchandise, both its private brands and national brands, comes from overseas and that's true throughout retailing.
Penney's stock price is lower in the pre-market. Soltau is speaking with analysts on a conference call this morning. Wall Street gyrations of late have had to do some with President Trump's proposed tariffs on China. Soltau said so far there's been a minimum impact on Penney and the company in recent years has been proactively diversifying to other countries. Imports from China are already lower than the industry average, she said. Last week Walmart and Macy's addressed higher tariffs on goods from China as a concern. Walmart said prices would go up with the latest proposed tariffs. Macy's said a fourth round of tariff hikes could mean higher prices for its customers.