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Could JCPenney Surpass Analysts’ Q4 Revenue Expectations?

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Disappointing revenue trend

JCPenney’s (JCP) revenue (net retail sales plus credit income) fell in each of fiscal 2018’s first three quarters. The company has missed analysts’ revenue expectations for four consecutive quarters.

In fiscal 2018’s third quarter,[1.ended November 3] JCPenney’s revenue fell 5.3% to $2.73 billion and fell short of analysts’ expectation of $2.81 billion, and its net sales fell 5.8% to $2.65 billion due to a 5.4% decline in same-store sales. JCPenney’s credit income grew 15.9% to $80 million, driven by credit portfolio improvements.

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Fourth-quarter revenue expectations

In fiscal 2018’s fourth quarter, analysts expect JCPenney’s revenue to fall 6.0% to $3.79 billion due to disappointing holiday sales. On January 8, the company reported that its same-holiday sales (for the nine weeks ended January 5) fell 3.5% on a shifted basis and 5.4% on an unshifted basis.

As part of its turnaround efforts, JCPenney tried to boost its sales by focusing on several categories beyond apparel, such as home, beauty, toys, and furniture. On February 6, the company announced that it would cease selling major appliances at its stores at the end of the month. JCPenney will also pull furniture from most of its stores and sell it only on jcp.com and in Puerto Rican stores. These decisions, under the leadership of the company’s new CEO, Jill Soltau, reflect management’s efforts to reduce the company’s exposure to narrower-margin merchandise categories. JCPenney now intends to focus on wider-margin merchandise such as apparel and soft home furnishings.

In fiscal 2018, analysts expect JCPenney’s revenue to fall ~3.9% to $12.0 billion. Next, we’ll look at analysts’ recommendations for JCPenney stock.

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