PLANO, Texas — Fresh off an earnings report that included better-than-expected quarterly profit and the closing of 27 more stores, J.C. Penney’s new CEO says she’s confident about the future but concedes “we need to move faster.”
Jill Soltau’s positive outlook came Thursday when the Plano-based retailer reported fourth-quarter results, filled some key jobs and announced the shuttering of 18 department stores and nine free-standing furniture stores.
“For the past few months, I have met with and listened to J.C. Penney associates throughout the organization, as well as our valued suppliers, customers and other partners, to gain their candid perspectives on our company,” Soltau said. “Based on everything I have seen and heard, I am even more convinced that J.C. Penney is a revered brand that has the capacity to deliver improved results.”
Soltau, who joined Penney in October, made significant progress on slashing inventories, something she had said she’d tackle first. Inventories fell 13 percent and will probably fall again in the first quarter as kitchen and laundry appliances are sold off.
She’s also discontinued appliances, which only represented 2.7 percent of sales and weren’t profitable, and decided to take furniture out of the 105 stores that still sold it. Furniture still will be sold on jcp.com.
Women’s apparel, which had been a drag on the company’s financial results, posted positive same-store sales, and men’s and children’s clothing performed better than the overall store decline. Fine jewelry sales have been strong for a while and had a double-digit percentage increase.
Penney’s stock gained 28 cents, or nearly 23 percent, to close Thursday at $1.52 a share. While it was the best day the stock has had in a while, the price had dropped 70 percent before the earnings release.
Soltau announced three new executive hires and said she’s still looking for a leader for Penney’s e-commerce business. Penney stopped breaking out its online sales a couple of years ago and internally applies those sales to the store nearest the customer.
Michelle Wlazlo becomes chief merchant and executive vice president. She comes from Target, where she was senior vice president of apparel and accessories. She helped lead Target’s transformed presentation in 1,400 stores and the launching of 15 new private brands.
John Welling comes to Penney from Michaels Cos. and will be senior vice president of planning and allocation. He spent more than 10 years at Walmart and was previously a partner at Accenture for its North American retail practice.
Mark Stinde takes over as senior vice president of asset protection. He joins Penney with 23 years of experience in loss prevention and store operations, including stints at 7-Eleven, Toys R Us and Home Depot.
Penney will take a charge of about $15 million in the first quarter to cover costs of the store closings, including severance for employees losing their jobs.
The locations either needed significant investment, created minimal cash flow or appeared to be strong real estate sale opportunities, the company said. Their comparable sales were described as being significantly below the rest of the company’s 840 department stores.
Penney did not identify the stores being closed, but spokeswoman Daphne Avila said none are in Texas.
Penney is in about 90 malls where Sears stores are in the process of closing, said Trent Kruse, senior vice president. Those going-out-of-business sales have been a headwind for Penney but may present “an opportunity going forward,” he said.
Reducing inventory and hiring a new chief merchant “are key steps by J.C. Penney as it works toward getting the right product and presentation to the customer,” said Christina Boni, Moody’s vice president. “Despite its weak fourth-quarter performance, J.C. Penney continues to have very good liquidity with approximately $1.9 billion and minimal short-term maturities.”
The company reported a profit of $75 million, or 24 cents a share, compared with a profit of $242 million, or 77 cents a share, a year ago. Penney still managed to beat analysts’ forecast of 11 cents a share, according to Refinitiv.
Same-store sales declined 4 percent in the holiday quarter and total sales fell 9.5 percent to $3.67 billion vs. $4.05 billion last year. For the year, sales fell 7.1 percent to $11.66 billion compared with $12.55 billion a year earlier. Same-store sales dropped 3.1 percent for the year.
Soltau hasn’t yet outlined a long-term strategy and said she is still learning about the company.
Cowen Equity Research analyst Oliver Chen called Penney’s overall results “better than feared” and identified “some green shoots.” But he said it was the second consecutive quarter that Sephora hasn’t been called out as a leading department. He said new products Penney mentioned should improve Sephora performance.
Penney’s partnership with Sephora dates back to 2006 and has been a strong suit even as the department store has struggled. There are Sephora shops inside 575 J.C. Penney stores.
Soltau said she met with Jean-Andre Rougeot, new U.S. CEO for Sephora, a couple of days ago and considers that a strong relationship. “We’re on the same page and see great things for Sephora inside J.C. Penney,” she said.
Penney’s report comes as the retail industry’s fourth-quarter results weren’t all good or all bad. But it proved retailers have to increase sales and not just cut costs to impress investors.
Best Buy and Walmart posted strong holiday quarters. Same-store sales came up short at Macy’s after a weak December. Macy’s announced a restructuring plan with the goal of saving $100 million a year that includes cutting 100 management jobs — vice presidents or above — to increase decision-making speed.
Home Depot missed expectations and Lowe’s said its mixed results were due to a slow housing market in Canada. At Lowe’s, former Penney CEO Marvin Ellison began closing the gap with Home Depot, said Oppenheimer analyst Brian Nagel during an appearance on CNBC. In the U.S., Lowe’s fourth-quarter same-store sales gain of 2.4 percent to Home Depot’s 3.7 percent is the narrowest spread in a while, Nagel said.