JCPenney sales in Q2 disappoint; but its CEO optimistic about change

Bloomberg

JC Penney Co reported a challenging second quarter, exacerbating investors’ concerns about the health of department stores ahead of the holiday season. Still, its new chief is optimistic the turnaround is starting to take hold. “We are not simply running a business — we are rebuilding a business,” Chief Executive Officer Jill Soltau said. Shares swung between gains and losses in early trading.
Same-store sales, a closely watched metric in retail, fell 9 percent in the latest quarter. That’s worse than analysts’ expectations for a drop of 5.3 percent, according to Consensus Metrix. It would have been a 6 percent drop excluding the impact of its decision earlier this year to stop selling some furniture and appliances in stores, it said.
The company, long lamenting its over-supply of product, trimmed its inventory by 12.5 percent in the quarter, it said. It also reduced its markdowns, which had been hurting sales. “While we still have work to do on our topline, I strongly believe that growing sales in an unprofitable way is simply not an option,” said Soltau. The company expects liquidity to be at least $1.5 billion for the remainder of the year, it said.
It’s trying some new tactics to re-ignite growth. JCPenney is wading into the resale market, announcing a tie-up with thredUP, an online consignment store. This comes a day after Macy’s Inc announced a partnership with the same company.
But it could get tougher from here: JCPenney is among the retailers exposed to the US-China trade war as the critical holiday season approaches. The retailer in June sent a letter to the Office of the US Trade Representative explaining how its core customers — middle-class working women — would bear the brunt of the proposed tariffs.
Investors looking for updated information on how the retailer is approaching the tariff situation may have to wait a little longer for the company’s call in New York.