J.C. Penney Forecasts Lower Profit on Slowing Consumer Spending
By Lauren Coleman-Lochner
Nov. 14 (Bloomberg) -- J.C. Penney Co., the third-largest U.S. department-store company, forecast earnings that trailed analysts' estimates and posted its fifth straight quarterly profit decline as shoppers cut spending on home goods and jewelry.
Fourth-quarter profit will drop to 90 cents to $1.05 a share, the Plano, Texas-based company said today, after $1.93 a year earlier. Analysts surveyed by Bloomberg estimated adjusted profit of $1.28.
Consumers besieged by rising joblessness and increased housing costs have stopped spending on discretionary goods. Smaller Kohl's Corp. and luxury chain Nordstrom Inc. posted profit declines yesterday and cut their full-year earnings forecasts. J.C. Penney said comparable sales at stores open at least a year will fall as much as 11 percent in the fourth quarter.
Those earnings per share numbers are good, given the lousy comps,'' Dan Poole, senior vice president of equity research at National City Bank, said today in a telephone interview. Poole called the sales forecast realistic.'' His Cleveland firm has $34 billion in assets including J.C. Penney shares.
Retail sales in the U.S. dropped 2.8 percent in October, the fourth consecutive drop and the biggest since records began in 1992, the Commerce Department said separately today in Washington. Purchases excluding automobiles also fell by the most ever.
Third-quarter net income decreased 52 percent to $124 million, or 56 cents a share, from $261 million, or $1.17 a share, a year earlier, the department-store chain said in a statement. Sales fell 8.7 percent to $4.32 billion from $4.73 billion.
Profit Beats
Excluding some items, J.C. Penney earned 53 cents, at the high end of its forecast of 51 cents to 53 cents. Eight analysts surveyed by Bloomberg estimated average profit of 52 cents on that basis.
J.C. Penney rose 71 cents, or 3.8 percent, to $19.28 yesterday in New York Stock Exchange composite trading. The shares have fallen 56 percent this year, compared with a 33 percent decline for Kohl's and a 35 percent drop in the 27- company Standard - Poor's 500 Retailing Index.
J.C. Penney cut its third-quarter profit forecast twice since Aug. 15, and initially said it might earn as much as 75 cents a share.
Unlike other retailers, J.C. Penney has cited women's clothing as a top seller, saying during its October sales call that new brands such as Decree showed early success.'' That could signal recovery elsewhere in the store, said Lauri Brunner, an analyst at Thrivent Asset Management in Minneapolis.
Holy Grail'
That's the highest margin business they have, that's the holy grail, and if you can get mom to come in and cinderella dress up games shop and buy things for herself, she's going to buy kids apparel, too, and fringe dress other things,'' Brunner said in a Nov. 13 telephone interview. Her firm oversees $68 billion in assets including J.C. Penney shares.
J.C. Penney said today that women's and children's clothing and slip dress shoes were the best-selling categories in the third quarter. It also said it would add two women's clothing brands for early next year, a fashion sportswear collection by designer Charlotte Ronson and a dress line by Allen B. Schwartz.
Sears Holdings Corp.Macy's Inc. are larger department- store chains.
To contact the reporter on this story: Lauren Coleman-Lochner in New York at llochnerbloomberg.net.
Last Updated: November 14, 2008 09:02 EST
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