J.C. Penney Company Inc. (NYSE: JCP) Earnings Preview: What to Watch in This Retail Tragedy

J.C. Penney Company Inc.’s (NYSE: JCP) 36-year-old tale will likely continue in tragedy today (Wednesday), as it is projected to report a $0.81 per share loss in its Q4 2013 earnings after the bell.

That would notch a $239.15 million net loss, compared with a loss of $427 million, or $2.51 cents per share, in the same quarter last year, according to a survey of analysts by Thomson Reuters.

Revenue is expected to come in at $3.85 billion, a 0.8% decrease from $3.88 billion a year earlier. 

For the fiscal full year 2013, analysts expect a $1.51 billion loss ($6.47 per share) on revenues of $11.93 billion. This loss would widen its decline in full year 2012, in which J.C. Penney experienced a $766 million loss ($4.49 per share) on revenues of $12.99 billion.

Overall sales have fallen approximately 31% in the last two years to an estimated $12 billion. JCP stock has plummeted nearly 75% after hitting its 52-week high of $21.76 per share on Feb. 25, 2013. JCP shares are up a little over 1% today before earnings release, sitting at $5.70 per share.

Earlier this month, the fraught retailer announced that same-store sales (a figure used to determine what amount of sales growth is attributable to new store openings) has risen 2% - the first time sales rose since 2011.

That said, the progress of same-store sales for the period seems relatively discouraging. After a 10% gain in November, it followed with a 2% loss in December, and a 4% loss in January. Additionally, the gain was 2% under Wall Street’s 4% projection.

Today, we’ll get more insight on the numbers that have been dragging down J.C. Penney.

Here’s what to watch in its earnings release this afternoon…

On Feb. 18, the U.S. Department of Commerce announced its quarterly retail e-commerce sales for Q4 2013. An increase of 3.4% was seen just since Q3 2013 for a total of $69.2 billion. The number is also a 16% increase since the same quarter in 2012.

Although J.C. Penney said its online sales rose 26.3% over the holidays, it appears to be rapidly losing market share to competitor sites.  

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JCP reached a peak of $1.52 billion in online sales in 2011, but fell by a third in 2012, losing ground to the likes of Kohl’s Corp. (NYSE: KSS), which rose 41% that year, and Macy’s Inc. (NYSE: M).

J.C. Penney nets 8% of its sales online, compared with 15% a decade ago, including catalog sales, according to Reuters. Penney’s numbers were equal to Macy’s in 2010, but only two years later, Macy’s had multiplied three times that amount.

"I don't see how you survive without [web sales]," Standard Life Investments senior vice president and portfolio manager Ken Murphy said to Reuters.

Additionally, J.C. Penney stands to suffer from an overall challenging U.S. retail sales environment.

On Feb. 13, U.S. retail sales - which account for 70% of economic activity - unexpectedly fell 0.4% for the month of January according to the Commerce Department. The decline marks the second straight drop after a 0.1% fall in December.

The report showed that Americans are presently spending less on clothing and that retailers experienced soft holiday sales at the end of 2013; the report even retroactively downgraded November and December retail sales numbers.

Foul weather is the main culprit behind the U.S. retail sales decline over the past few months.

Finally, look for Penney’s overall outlook for the rest of 2014. In January, the company announced it would close 33 stores and let 2,000 workers go by May 2014, for a total annual cost savings of around $65 million. Other internal restructuring could be in store today.

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Related Articles:

• U.S. Department of Commerce:
  Quarterly Retail E-Commerce Sales, 4th Quarter 2013
• Reuters:
  For J.C. Penney, E-Commerce Is No Easy Fix