J.C. Penney’s sales fell 10.1 percent in the second quarter year-over-year to $1.61 billion from $1.79 billion a year ago, according to a regulatory filing.
Including credit card revenue, total revenue in the period fell 10.2 percent to $1.68 billion from $1.87 billion.
J.C. Penney said, “During the second quarter, net sales declined as the macroeconomic environment continued to put pressure on consumer discretionary spending. Although total sales remain down in comparison to last year, second quarter digital sales as a percent of total sales increased over the prior year as enhancements to the website continued to resonate with customers. Additionally, the frequency of customer visits to stores increased over the same period last year by 350 bps. Credit income declined slightly, reflecting the continued health of the underlying customer portfolio and approval rates for new customers remained strong throughout the quarter.”
Gross margins eroded to 38.6 percent of sales from 41.1 percent a year ago as higher merchandise margins weren’t enough to offset the sales decline.
J.C. Penney said in the filing, “Merchandise gross profit rates improved 70 basis points for the quarter over last year with margin expansion coming from both channels. Notable category margin improvements were seen in the areas of Kids and Home. Customers continued to shift more of their purchases to the company’s private-label brands like St. John’s Bay and Stafford, further emphasizing the option of quality at a great value that these brands provide. National brands continue to be an important part of the business and performed well in the period, with additional brand introductions planned for later this year. Disciplined promotional and clearance activities coupled with a tight inventory management strategy continued to benefit the bottom line and improve the inventory position for the company. Overall inventory was down 14 percent over the same period last year. “
SG&A expense was about flat at $601 million against $599 million a year ago. J.C. Penney said, “Due in part to increased investments in infrastructure and growth-minded activities, selling, general, and administrative costs increased slightly over the prior year. To offset these planned investments, the company remains committed to driving greater efficiencies and reducing discretionary spend. Restructuring charges in the period were primarily one-time, non-cash charges related to the transition of JCP Beauty that were offset by one-time gains recorded during the period.”
Operating income fell 53.8 percent to $55 million from $119 million a year ago. Net income declined 65.4 percent to $36 million from $104 million a year ago. Margin improvement efforts and continued expense discipline could not offset the sales decline.
J.C. Penney’s retail business was acquired through the bankruptcy court by Brookfield Asset Management and Simon Property Group. J.C. Penney emerged from bankruptcy in December 2020 with less debt and about 200 fewer stores. It operates 644 stores.
Photo courtesy J.C. Penney
