J.C. Penney Q1 Loss Narrower Than Estimates, But Sales Miss View

(RTTNews) - Department store chain J.C. Penney Co. Inc. (JCP) on Friday reported a loss for the first quarter that narrowed from last year, as lower sales and weaker margins were more than offset by a decline in operating expenses.

Adjusted loss per share for the quarter was narrower than analysts' expectations, while revenues missed their estimates. Looking ahead, the company lowered its gross margin outlook for fiscal 2016, but affirmed its forecast for full-year earnings.The company's shares are down more than 10 percent in pre-market activity.

Marvin Ellison, chief executive officer, said, "While our first quarter sales were below our expectations, we are maintaining our annual comp guidance of 3 % to 4 % as a result of the positive nature of our recent sales trends, the strength of our Sephora business and our decision to accelerate our appliance rollout. However, we are lowering our full year gross margin guidance to a 10 to 30 basis points increase for the year, reflecting the rollout of appliances and the rapid growth of our online business."

Plano, Texas-based J.C. Penney's first-quarter net loss was $68 million or $0.22 per share, narrower than loss of $150 million or $0.49 per share in the same period last year.

Excluding items, adjusted loss for the quarter was $0.32 per share, compared to loss of $0.57 per share in the prior-year period.

On average, 19 analysts polled by Thomson Reuters expected the company to report loss of $0.38 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter declined 1.6 percent to $2.81 billion from $2.86 billion in the year-ago period. Analysts were looking for sales of $2.92 billion for the quarter.

Comparable sales for the quarter declined 0.4 percent, compared to an increase of 3.4 percent last year. For the quarter, Men's, Sephora and Footwear and Handbags were the company's top performing divisions, J.C. Penney said.

Gross margin contracted 20 basis points from last year to 36.2 percent of sales, as impacted by additional markdowns due to unseasonable weather, partially offset by an improvement in our clearance selling margin.

However, SG&A expenses, as a percentage of sales, were down 280 basis points from last year. Total operating expenses declined 8.4 percent from last year to $996 million.

Looking ahead to fiscal 2016, JC Penney affirmed its outlook for comparable store sales to increase 3 to 4 percent, and adjusted earnings per share to be positive, but now expects gross margin to increase only 10 to 30 basis points. Earlier, the company projected gross margin for the year to increase 40 to 60 basis points.