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JCPenney’s Q4 Results: Is There Scope for Improvement?

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Feb. 25 2019, Published 8:13 a.m. ET

Fourth-quarter expectations

JCPenney (JCP) is scheduled to announce its fiscal 2018 fourth-quarter[1.ended February 2] results on February 28. The company’s performance disappointed investors in fiscal 2018’s first three quarters, and JCPenney withdrew its previous earnings guidance after announcing its fiscal 2018 third-quarter results in November. The mid-tier department store chain felt that its newly appointed CEO and interim CFO needed more time to assess the company’s situation and decide on a course of action.

Analysts expect JCPenney’s adjusted EPS to fall 80.7% YoY (year-over-year) to $0.11 in fiscal 2018’s fourth quarter. Weak sales and higher expenses are expected to impact the company’s bottom line.

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Recapping JCPenney’s previous performance

JCPenney reported losses in each of the first three quarters of fiscal 2018. In the third quarter, its adjusted loss per share widened YoY to $0.52 from a loss of $0.35 due to lower sales and deleveraged expenses. Its gross margin narrowed YoY to 31.9% from 34.0% as the company marked down slow-moving inventory, and its operating margin deteriorated YoY to -3.8% from -2.8% due to higher store-controllable costs and marketing expenses.

In fiscal 2018, analysts expect JCPenney’s adjusted EPS to fall YoY to -$1.00 from $0.22. In January, JCPenney reaffirmed that it expects positive free cash flow in fiscal 2018. Next, we’ll discuss JCPenney’s revenue expectations.

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