J C Penney Company Inc. (NYSE:JCP) reported earnings and the company appears to be much more upbeat about their progress turning the company around than the investing world. Same-stores sales improved over 4% and that actually beat Wall Street’s expectations but they also extended their bottom line losses which was news that was not received well by traders.
The J C Penney Company Inc. (NYSE:JCP) reported revenue of $3.9 billion but showed a negative EPS of 19 cents. That was based on a dollar loss off $59 million. The loss paled in comparison to the same-period last year where the retailer showed a profit of $35 million. After adjusting for items, the company states the recent quarter was a break-even period. The revenue number was a gain of 3% when compared to last year’s same period but the issue is the company’s sudden aversion to turning that revenue into a profit. Analysts were expecting sales of $3.9 billion but a profit of 13 cents per share.
Discounting To Compete
Going forward, the company says they expect same-store sales to continue to grow at the current rate of 3%. They noted that in an effort to compete with discount retailers like Target, they had to offer deep discounts on products they normally would sell at full markup. Free cash flow – an indicator commonly used with retailers to determine how much cash the business is generating –came in flat. This is concerning investors as the company attempts to fully recover from past years where they bordered on closing down.
Rose Colored Glasses
Despite the ominous numbers, company executives continue to see the recovery as being on track. They feel they have returned their image in shopper’s eyes as being the same reliable retailer they were in the 80’s. Competition is the main concern as it still remains a big question as to whether the company can truly regain the powerful sales numbers of the past, and turn those sales into profitability.
The stock failed to complete its breakout from the short-term cup and handle pattern. This is very bearish and shows it needs to reconsolidate before moving forward.