J. C. Penney Company Inc. reported net sales decreased 1.8 percent to $2.81 billion in the third quarter compared to $2.86 billion in the same period last year, primarily the result of the 139 stores closed this year through the end of the third quarter. Comparable sales increased 1.7 percent for the third quarter, resulting in a positive two-year stack of 0.9 percent.
Marvin R. Ellison, chairman and chief executive officer, said, “During the third quarter, we took aggressive actions to clear slow-moving inventory, primarily allowing for an improved apparel assortment heading into the Holiday season. While these actions had a negative short-term impact on profitability in the third quarter, we firmly believe it was the right decision for the company as we transition into the fourth quarter and fiscal 2018.”
Ellison continued, “We are encouraged that we delivered positive sales comps for the third quarter. Our growth strategies and new apparel initiatives led to sequential comp sales improvement in nearly all merchandise categories in the third quarter, giving us confidence that our overall strategy and transformation is beginning to take hold. While we have more work to do, we remain focused on two critical factors – to operate the business for growth and deliver positive earnings. We’re committed to making the right strategic decisions to ensure we are providing our customers more reasons to shop and experience JCPenney.”
Home, Sephora, Footwear and Handbags, Women’s Specialty and Salon were the company’s top performing divisions during the quarter. Geographically, the Gulf Coast and Midwest were the best performing regions of the country.
For the third quarter, cost of goods sold, which excludes depreciation and amortization, was $1.85 billion, or 66 percent of sales, compared to $1.8 billion, or 62.8 percent of sales, in the same period last year. This increase was primarily driven by the liquidation of slow-moving inventory, higher shrink rates and the continued growth in the company’s online and major appliance businesses.
SG&A expenses for the quarter declined $48 million to $840 million, or 29.9 percent of sales, and decreased 120 basis points as a percentage of sales compared to the same period last year. These savings were primarily driven by reductions in store controllable costs, marketing efficiencies and corporate overhead.
For the third quarter, the company’s net loss was ($128) million, or (41 cents) per share, compared to a net loss of ($67) million, or (22 cents) per share in the same period last year. This reduction was driven in large part by increased cost of goods sold, restructuring charges associated with the store closures and a charge related to settlement accounting on the company’s pension plan.
Adjusted net loss was ($102) million, or (33 cents) per share, for the third quarter this year compared to an adjusted net loss of ($65) million, or (21 cents) per share, last year.
Adjusted EBITDA for the third quarter was $108 million compared to $174 million last year.
Inventory at the end of the third quarter 2017 was $3.37 billion, a decrease of 8.8 percent compared to the end of the third quarter last year, and down 5.7 percent on a comp store basis.
Cash and cash equivalents at the end of the third quarter were $185 million. The company ended the quarter with liquidity of approximately $2 billion.
The company’s fiscal 2017 full year guidance is as follows:
- Comparable store sales: expected to be -1.0 percent to 0.0 percent;
- Cost of goods sold: expected to be up 100 to 120 basis points versus 2016;
- SG&A dollars: expected to be down 1 percent to 2 percent versus 2016;
- Adjusted earnings per share: expected to be a positive 2 cents to 8 cents; and
- Free cash flow: expected to be $200 million to $300 million.