As my mother used to tell me as she'd tan my hide if I gave her any sass, "It's not what you say but how you say it" that gets you into trouble. Well, the market is similarly disciplining J.C. Penney (JCPN.Q) for sassing it with a holiday operations update that was devoid of any facts.
The troubled department store operator sent out a press release regarding the Christmas shopping season that could charitably be described as being short on specifics -- and just about everything else. The brief, three-sentence release said it was "pleased" with how things went, its customers responded well to its in-store and online merchandise, and fourth-quarter guidance is still on track. See ya soon! Shares of the retailer plunged 10%.
The problem with the announcement, despite the apparent smiley face planted on news, is that Penney is giving investors less and less detail with each passing month, giving the impression at least that they don't want to let the cat out of the bag of an awful showing too soon.
In early November, the department store operator reported that October same-store sales rose 490 basis points over September's numbers and its online business saw sales surge 37%, driven largely by a 50% increase in home merchandise. While this was a definite improvement from its recent performance, Wall Street's expectations seemed set unrealistically high. Last month, however, it followed up with a slightly less forthcoming release, noting that comps were up more than 10% from the year-ago period, but failed to disclose what traffic in its stores was like and only allowed CEO Myron Ullman to remark that trends were "exciting."
So when it basically cut out all the extraneous verbiage from its press release yesterday and said, "Things are wonderful," lacking any sort of supporting data -- not even a quote from Ullman -- it rightly scared the market.
Compare that to Macy's (M -1.05%), which also reported holiday sales results yesterday. It showed that comps rose 3.6% for the November to December period, and though expectations for the full quarter were sharply narrowed, it also gave preliminary earnings guidance for 2014 that was well ahead of analyst expectations. Yet as successful as it's been, it also announced it was cutting 2,500 jobs in an effort to save $100 million.
If Macy's, which has been significantly more successful than Penney over the past few years and has seemingly navigated a tenuous holiday shopping season, is coming under financial pressure, what conclusions can we draw from Penney's tight-lipped efforts other than that the final tally is going to be a lot less than we hoped for?
With that said, perhaps the retailer's plan is to underpromise and overdeliver, to let its results speak for themselves without any puffery when they're released. In fact, I was critical of Ullman previously for saying too much, such as when he told investors the retailer didn't need to raise cash just one day before filing to do just that. But if all you're going to do is release a vapid announcement like the one Penney did yesterday, then it might be best if the retailer takes to heart the advice of that country song: "You say it best when you say nothing at all."
