Why J.C. Penney's Turnaround Still Isn't 'Good Enough'
NEW YORK (TheStreet) - J.C. Penney
Current management has been working hard to reverse J.C. Penney's ill fortune of a failed attempt to overhaul of the Plano, Texas-based department store's strategy under its former CEO, Ron Johnson. J.C. Penney's current CEO Myron 'Mike' Ullman said in a fourth-quarter earnings call that the company planned to complete the turnaround by the end of this year.
The first quarter will finally be a period in which J.C. Penney's sales and margin numbers will give investors a true look into the company's performance, now that underperforming merchandise brands that didn't resonate with customers have been mostly removed and popular private-label brands have been restocked. But it's been a tough road to pull up comparable sales, even in the all-important holiday quarter, comps only rose 2% over the prior year's quarter. Will J.C. Penney's first quarter's earnings be more of the same disappointment, hampered even further by a rough winter that affected all retail sales?
The harsh winter took a toll on sales at retail bellwether Macy's
However Macy's sales fell 1.7% as compared to the prior quarter, to $6.279 billion, and fell short of analysts' expectations of $6.457 billion for the quarter. Macy's reported comparable store sales fell 1.6% for the quarter compared to estimates of 0.7% growth. Comps including sales from departments licensed to third parties declined 0.8% in the quarter as compared to the year-earlier period.
Macy's reiterated its guidance for comp growth in fiscal 2014 in the range of 2.5% to 3%. The company also reiterated its guidance for 2014 earnings of $4.40 to $4.50 a share.
In contrast, expectations for J.C. Penney are already incredibly low for the quarter. Analysts are expecting a loss of $1.25 a share for the company's fiscal first quarter versus $1.38 a share loss in the first quarter of 2013, according to a survey from Thomson Reuters.
J.C. Penney's revenue is expected to rise 3% from last year's quarter to $2.707 billion, according to Thomson Reuters. That's pitiful though when compared to Amazon's
That said, J.C. Penney shares have surged 44% since its last earnings report on February 26. "We believe the turnaround is still on track," writes Piper Jaffray analyst Neely Tamminga in a note to clients last week.
Tamminga, who has an "overweight" rating on the stock, based her conclusion on several factors. According to Tamminga, customers are liking what they see at J.C. Penney stores; the completed changeover in the home category; J.C. Penney's improved inventory management and product balance as well as private-label brands being restored, boding well for margins.