J.C. Penney is closing more stores following weak holiday sales season for the retailer.
Net income tumbled nearly 70 percent, and a key measure for health dropped 4 percent in the fourth-quarter, the most crucial period of the year for retailers who bank on strong holiday sales.
The company’s did top expectations for the fourth quarter results and under new CEO Jill Soltau, the department store rid itself of unprofitable inventory and said it will have positive free cash flow this year.
Shares jumped nearly 22.6 percent Thursday to rise to its highest level since last November.
J.C. Penney says it will close 18 department stores and nine home and furniture shops in 2019. That’s far below the predictions some analysts were making, which called for more than 100 additional stores to go dark this year.
The retailer is still operating more than 800 locations across the country, including stores at Hamilton Place Mall in Chattanooga and the Bradley Square Mall in Cleveland, Tennessee.
Soltau, who came on board in October, faces numerous challenges in avoiding the fate of Sears or other retailers that have filed for bankruptcy protection, or vanished in markets like Chattanooga.
Soltau jettisoned major appliances which accounted for 2.7 percent of J.C. Penney’s sales last year but dragged on the company’s operating profit.
It’s focusing instead on women’s clothing, and goods for the home like towels or bedsheets, which carry higher profit margins. Furniture is still available, but only online.
That reverses the course followed by predecessor Marvin Ellison, who three years ago began selling major appliances again in an attempt to capitalize on problems at Sears.
In a conference call Thursday, Soltau said she has spent time with customers, suppliers and workers and she said she’s convinced that the company can establish a path of “sustainable profit growth.”
Changes will be swift, methodical and based on what customers want and expect from J.C. Penney, Soltau said. “This is not business-as-usual,” she said during a conference call Thursday. “Our current reality is clear.”
Department stores like J.C. Penney are trying to reinvent themselves in an era when Americans are buying more online, or turning to discounters like T.J. Maxx for clothing.
Bringing back shoppers is has proven exceedingly difficult, even for iconic brands.
Momentum appears to be slowing at Macy’s, which released fourth-quarter results this week. It reported weaker profit and total sales, as well as meager growth in sales at established stores, a key measure for a retailer’s health.
Nordstrom posts earnings late Thursday and Kohl’s reports next week.
Among the four stores, only Kohl’s has seen its stock move higher over the past 12 months, but just barely. Shares of Sears and J.C. Penney are down more than 60 percent in the past year.
J.C. Penney posted net income of $75 million, or 24 cents per share, for the quarter. That compares with $242 million, or 77 cents per share, a year ago.
Adjusted per share was 18 cents per share, 7 cents better than analyst had projected, according to a survey by FactSet. Revenue including credit income, fell more than 8 percent, to $3.78 billion, but that was also better than expected.
Even though profit and sales fell, investors were elated that it wasn’t worse.