JCPenney’s 1Q16: Sales Fall after 5 Straight Quarters of Growth



Sales miss estimates

JCPenney’s (JCP) sales fell by 1.6% to $2.8 billion in 1Q16, amid a challenging retail environment. The company missed analysts’ sales estimate of $2.9 billion. The decline in JCPenney’ sales came after five straight quarters of sales growth. JCPenney announced its 1Q16 results on May 13.

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Sales decline in 1Q16

The decline in JCPenney’s sales in 1Q16 contrasts with its 2.6% growth in 4Q15 and 2% growth in 1Q15. JCPenney’s same-store sales declined by 0.4% in 1Q16. Same-store sales growth, an important financial metric for department stores, measures the change in sales generated by the existing stores of a retailer during a certain period, excluding the impact of store closures and openings.

In JCPenney’s 1Q16 conference call, chief financial officer and executive vice president Edward J. Record cited unseasonable weather and changes in consumer spending patterns as the reasons for the challenging first quarter. JCPenney experienced a strong start to the quarter in February, followed by a significant slowdown in March and early April. The categories that performed well in 1Q16 included men’s merchandise, the Sephora beauty business, and footwear and handbags. The iShares Russell Mid-Cap Value ETF (IWS) has a 0.1% exposure to JCPenney.

Competitors face pressure as well

The first quarter of fiscal 2016 reflected an overall weakness in the performance of department stores. Macy’s (M) reported a 7.4% decline in its 1Q16 sales, citing lower spending by international tourists, among other reasons. Kohl’s (KSS) posted a 3.7% decline in its 1Q16 sales. Upscale department store Nordstrom (JWN) reported a lower-than-expected sales growth of 1.1% in 1Q16 due to weakness in its full-price business.

To improve its sales, JCPenney is focusing on merchandise categories beyond apparel. We’ll discuss this in part three of this series. In the next part of this series, we’ll discuss how JCPenney was able to trim its losses in 1Q16.


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