According to a financial filing, J.C. Penney’s net loss in the first quarter ended May 4 more than tripled to $63 million from $17 million a year ago. Sales declined 8.1 percent to $1.37 billion from $1.49 billion a year ago.
Comps for the mid-tier department store chain were down 6.3 percent in the quarter compared to a year ago and off 7.5 percent on a trailing 12-month basis.
Consolidated adjusted EBITDA totaled negative $3 million from positive $56 million a year ago. Per the filing, Penney reported its EBITDA loss reflected “the impact of the sales declines that were mostly offset by margin improvement and ongoing cost-saving efforts.”
J.C. Penney, which had 663 stores in operation at the close of the quarter, said in the filing with the Securities & Exchange Commission, “During the first quarter fiscal 2024, JCPenney remained committed to serving America’s hard-working families and advancing its transformation agenda. With continuing economic pressure weighing on the discretionary income of middle-income America, the company focused its efforts on creating a more rewarding shopping experience while continuing to provide quality, affordable fashion and merchandise.”
J.C.Penney said that while overall sales “remain under pressure,” specific categories of merchandise continue to outperform and exceed planned results. The retailer noted that its overall women’s business was “strong,” particularly in apparel, handbags and shoes. “Customers continue to seek the quality and value provided by the company’s private label brands, Liz Claiborne and J. Ferrar, with both brands posting strong results and exceeding the company’s first-quarter expectations. Continued emphasis on greater availability of inclusive sizing resonated with consumers, and all areas of inclusive sizing (big and tall, plus and petite) outperformed during the period,” reported the retailer.
In marketing, J.C. Penney noted that investments were made in the iHeart Radio Country Festival supporting the Walker Hayes apparel collection launch and in an in-store 3-point shot contest with Shaquille O’Neill to promote the relaunch of its rewards campaign. Penney said the relaunch saw “a favorable response from customers.”
With a boost from its marketing efforts, officials at J.C.Penney noted it saw “an improvement in organic brand search volume trends on Google Search, drove double-digit increases over the prior year in reward members and reported improvements in net promoter scores.”
J.C. Penney said its gross profit rates were flat to last year as improving inventory efficiency remained a key area of focus. As a result, inventory was down 9 percent to last year.
SG&A costs were held flat year-over-year “as the entire organization continues to drive greater efficiencies and reduce discretionary spend to offset ongoing sales pressure,” J.C. Penney said in the filing. Savings were achieved through reductions in expenses related to stores, e-commerce and credit. Credit income declined over the last year due to lower participation income and lower gain share from the profitability of the underlying portfolio.
J.C. Penney said that during the quarter, it primarily used cash of $163 million to fund seasonal inventory purchases and capital expenditures of $52 million to fund projects to drive long-term growth.
“The company continues to prioritize managing a very healthy balance sheet with significant liquidity of approximately $1.6 billion as of the end of the period. The company has less than $500 million of outstanding long-term debt as of the end of the period and had no outstanding borrowings under its line of credit,” the retailer noted.
J.C. Penney emerged from Chapter 11 bankruptcy protection in February 2021 after completing the sale of its retail and operating assets to Simon Property Group and Brookfield Asset Management, Inc.
Under the leadership of Marc Rosen, who took over as CEO in November 2021, J.C. Penney is renewing the 121-year-old chain’s focus on its core middle-income shoppers with affordable fashion and housewares. In August 2023, the retailer announced plans to spend more than $1 billion by the end of 2025 to remodel stores, upgrade its online shopping site and app, and make its supply network more efficient so that online orders reach consumers more quickly.
J.C. Penney closed about a quarter of its stores as part of its bankruptcy reorganization efforts.
Image courtesy J.C. Penney x Walker Hayes
