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JCPenney Stock Tanked after Cut in 2017 Guidance



JCP stock fell

JCPenney (JCP) stock fell 8.0% to $2.87 on October 30 following a rating downgrade by Citigroup and other analysts. On Friday, October 27, JCPenney stock fell a significant 14.8% after the company slashed its outlook for full-year fiscal 2017. The disappointing news also pulled down the stocks of JCPenney’s department store peers. The stock prices of Macy’s (M), Nordstrom (JWN), and Kohl’s (KSS) fell 4.3%, 2.4%, and 2.5%, respectively, on October 30.

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As of October 30, JCPenney stock has fallen a massive 65.5% on a YTD (year-to-date) basis. The stock prices of Macy’s, Nordstrom, and Kohl’s have fallen 47.4%, 16.5%, and 16.0%, respectively, on a YTD basis. These department store stocks have underperformed the S&P 500 Index, which has risen 14.9% since the start of 2017.

Updated guidance

JCPenney now expects its fiscal 2017 same-store sales in the -1.0% to 0.0% range compared to the previously issued guidance of -1.0% to 1.0% growth range. The company expects its fiscal 2017 adjusted EPS in the $0.02 to $0.08 range compared to the prior guidance of $0.40 to $0.65.

The downgrade in the guidance is the result of the company’s decision to markdown slow-moving inventory in fiscal 3Q17, mainly in the women’s and other apparel categories. The third and fourth fiscal quarters are crucial sales periods for department stores, as they include the back-to-school season and the holiday season, respectively. Department store sales have been under pressure due to a tough retail market and growing rivalry from online retailers like Amazon (AMZN).

For fiscal 3Q17, which ended on October 28, 2017, JCPenney expects its same-store sales to rise 0.6% to 0.8% on a year-over-year basis. JCPenney expects its fiscal 3Q17 adjusted EPS in the -$0.45 to -$0.40 range.

Some analysts revised their ratings for JCPenney stock following the downward revision in the company’s 2017 guidance. We’ll discuss this in the next part of this series.


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