Things are going from bad to worse for J.C. Penney Company Inc. (NYSE:JCP) after its latest earnings report. The stock was down 25.1% as of 3:23 p.m. EDT Thursday.
The struggling retailer posted another round of disappointing results for the second quarter with a wider loss than expected. The company also cut its guidance for the year, which is a sign that the hoped-for turnaround is failing to gain traction.
J.C. Penney actually posted positive comps for the quarter, but the 0.3% growth wasn't enough to impress the market at a time when industrywide retail sales are growing 6% year over year. Overall revenue was down 7.8% in the period to $2.83 billion, due to store closures last year, which missed estimates at $2.86 billion.
The business's weakness was especially evident further down the income statement. Gross margin fell 160 basis points to 35.3% due to markdowns to clear slow-moving seasonal inventory, a familiar refrain, and the store closures helped push selling, general, and administrative expenses up 60 basis points to 31.9% of total revenue.
On the bottom line, J.C. Penney reported an adjusted per-share loss of $0.38, which is worse than the $0.07 loss it had a year ago and well below estimates of a $0.06 per-share loss.
CFO Jeffrey Davis explained that the company changed its merchandising strategy in the quarter "from 'buying to store capacity' to 'buying and chasing' into demonstrated sales trends," and blamed prior purchase commitments in part for the weak results.
As a result of those inventory management issues, management also slashed its guidance for the quarter, calling for comparable sales to be flat, compared to a previous range of 0 to 2%, while it now sees a per-share loss of $0.80 to $1, much worse than a previous range of -$0.07 to $0.13.
J.C. Penney is also continuing to look for a new CEO after Marvin Ellison suddenly quit to take the same position with Lowe's. At this point, that seems like one of myriad problems facing the company.