Investors are punishing J.C. Penney Co. Inc.’s shares today after the company released a softer-than-expected outlook for the year. The department store chain also announced several changes in leadership and 360 layoffs across the company.
As of 11 a.m. ET, JCPenney shares were down 8 percent to $3.61.
Following two-plus years of uneven performance — which the company has tried to improve via store closures, omnichannel advancements and new product initiatives — JCPenney today predicted that its 2018 comparable sales would be flat to up 2 percent and its adjusted diluted earnings per in the range of 5 cents to 25 cents, disappointing investors who had been thirsting for larger growth.
Seemingly, the company’s latest efforts to circumvent sluggish trends were also announced today when it said it would take steps to “reduce corporate bureaucracy, flatten organizational structures and take out costs.”
Specifically, the firm eliminated 130 “home office” positions across various departments. Additionally, JCPenney recently restructured its group, regional, district and store support teams, which led to another 230 layoffs. The company said annual cost savings generated from the home office and store reorganization are estimated at $20 million-$25 million.
“These decisions are always difficult, but necessary to speed up decision-making and make us a more efficient company,” CEO Marvin Ellison told investors during a call.
Reporting fourth-quarter results, the firm said sales during the period increased 1.8 percent to $4.03 billion, roughly in line with analysts’ forecasts. Comparable sales rose 2.6 percent, with jewelry, home, Sephora, footwear and handbags and salon serving as the company’s top-performing divisions during the quarter.
Net income was $254 million, or 81 cents per diluted share, a gain of 32 percent over the same period last year. (The improvement was primarily due to a $75 million tax reform benefit recorded in the fourth quarter, the company noted.)
Adjusted net income was $179 million, 57 cents per share, handily topping forecasts for adjusted diluted EPS of 47 cents per share.
For the full year, net sales decreased 0.3 percent to $12.51 billion. Comparable sales increased 0.1 percent for full-year 2017.
Net losses were $116 million, or 37 cents per share, compared with net income of $1 million, or 0 cents per share last year. This reduction was driven primarily by restructuring charges associated with the fiscal 2017 store closures and voluntary early-retirement program, the company said.
Adjusted net income more than doubled year over year to $68 million, or 22 cents per share.
As part of a strategic realignment of its leadership team, JCPenney also announced today several management appointments. Joe McFarland has been named EVP and chief customer officer, a newly expanded role that includes responsibility for merchandising, as well as leading all JCPenney store operations. Jodie Johnson has been promoted to head of merchandising for women’s, beauty and family footwear; and James Starke has been promoted to head of merchandising for men’s, children’s, home and jewelry, both reporting to McFarland. Additionally, Therace Risch will assume the combined titles of chief information officer and chief digital officer to reflect her added responsibility for omnichannel retail, JCPenney said. As a result of this appointment, Mike Amend, EVP of omnichannel, will be leaving the company.