Zacks_Analysts' Blog : Not a Great Holiday for JC Penney - Analyst Blog

Surely, it was not a great holiday for J. C. Penney Company Inc. (JCP), a leading retailer of apparel and footwear, accessories, fashion jewelry, beauty products and home furnishings, as the company failed to utilize the busiest shopping season of the year.

The company witnessed a mere 0.3% increase in comparable store sales during the five-week period ended December 31, 2011compared with an increase of 3.7% in the prior-year period.  

During the period under review, The Plano, Texas-based J. C. Penney registered comparable-store sales growth across women's accessories and children’s attire. However, total sales inched down 2.3% year over year to $2,886 million during the reported period.

The company’s comparable-store sales for the forty-eight week period inched up 0.7%. However, total sales dropped 2.4% to $16,459 million.

J. C. Penney has experienced a continuous fall in its comparable-store sales for the last four months prior to December 2011. Comps declined 1.9% in August, 0.6% in September, 2.6% in October and 2% in November.

Moreover, situation is more or less same for monthly sales data, which has been falling persistently – 4.5% in August, 3.6% in September, 6.6% in October and 5.9% in November.

Further, the scenario is gradually becoming worse for the company as retailers such as Macy’s Inc. (M), Saks Incorporated (SKS), Ross Stores Inc. (ROST) and Limited Brands Inc. (LTD) posted healthy December comparable-store sales growth of 6.2%, 5.8%, 9% and 7%, respectively.

Drop in Guidance

Considering its soft sales results and higher markdowns, J. P. Penney trimmed its earlier sales and earnings forecast for the fourth quarter of 2011. The company now expects comparable store sales to be down marginally compared with the prior-year period and forecasts adjusted EPS in the range of $0.65 to $0.70 per share.  

Earlier, J. C. Penney forecasted comparable store sales to remain flat to up slightly and earnings between $1.05 and $1.15 per share for the fourth quarter of 2011.

Amid the gloom, J. C. Penney is trying every means to return back to its growth trajectory. The company's ongoing efforts to manage expenses and optimize operations, while continuing to invest in the opening of additional Sephora inside J.C. Penney beauty boutiques and the launching of new businesses under its Growth Brands Division is expected to generate incremental profits in the upcoming quarters.

Currently, J. C. Penney retains a Zacks #3 Rank, which translates into a short-term “Hold” rating. Moreover, considering the company’s fundamentals, we have a long-term 'Neutral' recommendation.