Dive Brief:
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J.C. Penney’s Q3 net sales fell 8% to $1.4 billion, according to financial filings Monday. With credit card income up nearly 33%, total revenue fell 6.2% to $1.5 billion.
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Gross margin was essentially flat at 38.7%, from 38.5% last year. Net loss narrowed 43.3% to $17 million. Inventory was flat year over year. For the first nine months of the fiscal year, consolidated adjusted EBITDA plunged nearly 64% to $66 million.
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The company reported that in Q3 signups to its new loyalty program rose by nearly a quarter compared to last year, “with customers earning and redeeming rewards at much faster rates.”
Dive Insight:
In its Q3 report, J.C. Penney reiterated that its “Really Big Deal” programming is gaining traction and said that the campaign “created additional momentum in September” in traffic and customer acquisition. All told the effort is expected to bring in more than 2 million new customers.
The company also said its net promoter scores saw year-on-year gains in Q3.
But in all, this was a “pretty weak set of numbers” that puts J.C. Penney toward the bottom of the department store sector, according to GlobalData Managing Director Neil Saunders.
”The good news is that losses have reduced this quarter, but the company remains firmly in the red for the year-to-date,” he said by email.
Also in the period, Penney said it made capital investments of $51 million to improve operations and the customer experience, part of a $1 billion turnaround announced last year. Selling, general and administrative costs declined year over year, though, thanks to lower store-related, e-commerce, marketing and administrative expenses.
“It’s not all that convincing a performance,” Saunders said. “There are some good things happening at JCPenney and management is trying to move the business forward, but it all feels like they’re trying to run up a fast moving down escalator right now and progress is very limited.”
J.C. Penney hasn’t had to deal with the often shorter-term view of shareholders, including the activist firms that have been dogging Macy’s Inc. this year. It is majority owned by two of its landlords, Simon Property Group and Brookfield Properties, which have a keen interest in keeping its mall anchors running. But given its ongoing sales declines, questions about its prospects remain.
“While JCPenney has more time and breathing space because of its ownership structure, it is still important for management to show that the business can at least stabilize the sales line,” Saunders said. “A failure to do this will create doubts as to how the chain can succeed over the longer term.”
