J.C. Penney (JCP), the beleaguered department store chain, reported a net loss of $348 million, or $1.58 per share, for the first quarter, more than double its loss from the same quarter last year. Total sales were down 16.4% to $2.67 billion and the company’s gross profit margin fell nearly 7 percentage points to 30.8% of sales.
Penney CEO Myron Ullman, who returned to the company after his successor Ron Johnson was fired in April, said he will reverse some of the controversial decisions that Johnson implemented during his 17-month tenure. Penney’s will reinstitute its promotions and bring back popular labels like St. John's Bay, he said. Ullman also warned analysts on Thursday that his fixes would not return the company to profitability overnight as Penney was emerging from an “abyss.”
Johnson, the Apple retail guru who was paid millions to revamp the retailer, had eliminated discounts and coupons and built upscale pop-up shops in Penney's 300 stores. Penney’s shoppers rebuffed the changes and sales plummeted.
“This was a company that years ago was doing $20 billion in sales,” says retail turnaround specialist Howard Davidowitz in the accompanying clip. “Now the company is doing $12 billion with more stores.”
Davidowitz had disapproved of Johnson’s hiring from the beginning and told his clients to short the stock. Even though Penney shares have rebounded 40% since Ullman took back the reins, Davidowitz still advises against owning the company and recommends buying Penney competitor Macy's (M).
“If you want to invest in retail I would not invest in J.C. Penney,” he argues. “You’re investing in a cadaver. It’s going nowhere but down. The worst is yet to come.”
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