The penny sounded a little tarnished today. J.C. Penney's (NYSE:JCP) problems with its Eckerd drugstore chain have been well reported, but today the damage may have felt a little bit more dire. The retailer reported a whopping loss for its fourth quarter.
What was the damage? Penney's reported a net loss of $1.07 billion, or $3.42 per share, as compared to earnings of $202 million, or $0.68 per share, in the same quarter last year.
Investors shrugged it off, though, once they realized that it was a reflection of $1.32 billion in charges related to an upcoming sale of Eckerd, as well as closure of Mexican operations. Eckerd, which is now counted under discontinued operations because it is considered "held for sale," has long been a drag on J.C. Penney's numbers.
Seeing how J.C. Penney is trying to shed the drugstore chain and move back to its roots, the news isn't so bad. Earnings from continuing operations rose 43% to $0.83 per share, as compared to $0.58 per share in the same quarter last year. Earnings for the entire year rose 27% to $1.21 per share, from $0.95 per share.
Meanwhile, same-store sales for its department stores rose 3.2%, while sales generated by Penney's catalog and Internet services rose 8.7%.
Glancing at Penney's department store story, the numbers show a silver lining. Going forward, though, Penney and its peers face serious pressure from bottom-dollar retailers like Wal-Mart (NYSE:WMT) and Target (NYSE:TGT).
And trying to stand out in this arena is cutthroat business. Sears Roebuck (NYSE:S) has been busy coming up with myriad ways to try to lure customer traffic and make its brand more viable. Sears has announced initiatives ranging from the clever to outlandish, but it still downplayed its outlook for the year.
Once Eckerd is ditched (and J.C. Penney said it is currently in talks as it searches for a buyer), it'll be time for it to aggressively take on the challenges at hand. Both Sears -- which recently shed its profitable credit card operations -- and J.C. Penney will have to show whether they can sink or swim once they return to their department store roots in a time when the space is more competitive than ever.
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Alyce Lomax does not own shares of any of the companies mentioned.
