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A Closer Look at JCPenney’s Mixed Fiscal 4Q17 Results

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YTD movement

As of March 6, 2018, JCPenney (JCP) stock has risen 19% to $3.76 on a YTD (year-to-date) basis. It fell 5.4% on March 2, 2018, in reaction to its mixed fiscal 4Q17 results. Investors were disappointed with its lower-than-expected sales. However, JCPenney exceeded the consensus analyst earnings estimate.

After reporting lower sales in the third quarter, JCPenney bounced back with sales growth of 1.8% in fiscal 4Q17 on strong holiday season sales. However, sales fell 0.3% in fiscal 2017. JCPenney and other department stores are struggling to thrive in a challenging retail market where online retailers are growing in strength.

On a YTD basis, JCPenney’s peers Kohl’s (KSS), Macy’s (M), and Nordstrom (JWN) have risen 23.2%, 20.5%, and 10.8%, respectively.

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Streamlining efforts

JCPenney is focusing on streamlining its operations and controlling its costs to mitigate the impact of weak sales growth. As part of its cost reduction efforts, the company announced on March 2, 2018, that it would eliminate 130 home office positions across various departments. It said it has also restructured its group, regional, district, and store support teams to further streamline its operations. The restructuring actions caused the elimination of an additional 230 positions. The home office and store reorganizations are estimated to generate annual cost savings of $20 million–$25 million.

On March 2, 2018, the company also announced the strategic realignment of its senior leadership team. It appointed Joe McFarland as executive vice president and chief customer officer, a newly-expanded role that includes a merchandising function and the responsibility to lead all JCPenney store operations.

We’ll look at JCPenney’s fiscal 4Q17 earnings in the next part of this series.

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