J.C. Penney Narrowed Its Loss on a 9% Sales Drop as CEO Soltau Said, “we Are Rebuilding a Business”

This story is being updated. J.C. Penney reported a narrower-than-expected loss on Thursday, but its sales drop of 9% was bigger than forecasts as CEO Jill Soltau said the Plano-based department store made progress.For the first time since joining Penney in October, Soltau offered guidance for the rest of the year, saying Penney will end 2019 with positive cash flow and earnings before interest and other taxes in the range of $440 million to $475 million.Penney posted a loss of $48 million, or 15 cents a share, compared with a loss of $101 million, or 32 cents a share, a year ago. Total sales declined 9.2% to $2.51 billion from $2.76 billion in the second quarter last year. Same-store sales fell 9%. Inventory was down 12.5% largely from the exit of major kitchen and laundry appliances and furniture in the first quarter.Analysts surveyed by Refinitiv forecast Penney would post a loss of 31 cents a share, sales of $2.69 billion and a same-store sales drop of 5.2%. That compares with a loss of 38 cents a share a year ago and sales of $2.83 billion.Penney will be hurt by higher tariffs, even though President Trump said Wednesday that he would delay some tariffs until after the holiday shopping season. But that batch of goods doesn't include most of what's sold at department stores.Tariffs bite department storesThere are still many consumer products that will be hit by the new 10% tariffs on $300 billion of Chinese imports on Sept. 1, including a large portion of apparel, some footwear, TVs, home goods, furniture, cookware and kitchen tools, sports equipment, linens, and more, according to the National Retail Federation.That's why department stores are among the most to be hurt this holiday season, one that is a tipping point for the category already hit by declining mall traffic, online competition and costs associated with building and operating an online business.President Trump said on Aug. 1 that he would impose a new tariff in addition to the 25% tariff already on about $250 billion worth of Chinese imports.But then on Wednesday he backed off of his proposed new tariffs "just in case some of the tariffs would have an impact on U.S. customers" during the Christmas shopping season. Trump's tariff delays until Dec. 15, or after holiday merchandise was in stores, are on many consumer electronics, video games and toys. Macy's, the first department store to report second quarter results, said Wednesday that discounting and delivery costs lowered its profit margins. Macy's also said that it tested higher prices and shoppers weren't biting. It posted flat sales a big drop in income, lowered its full-year earnings outlook and said it's partnering with reseller ThredUp to sell used clothes and accessories in 40 Macy's stores. Its Bloomingdale's chain will launch a clothing rental service to compete with Rent-the-Runway.Department stores all ranked in the lowest quartile among retailers who are hurt by tariffs, said Jharonne Martis, director of consumer research at Refinitiv. The hit from tariffs to profitability comes at a time when retailers such as J.C. Penney and Macy's have to spend on technology "on top of heavy discounting and delivery costs that they can't afford."Walmart's upWalmart on Thursday raised its full-year outlook. Its second quarter earnings and sales both beat forecasts and same-store sales increased 2.8% with strength in grocery, both in-store and online. Walmart also reported that its online increased 30%.Walmart has said that it can handle tariffs by adjusting prices across the store. About 30% of what it sells is imported.  Continue reading...

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