What Caused J C Penney Company Inc (NYSE:JCP) Shares To Drop 5.8%

J C Penny Inc (NYSE:JCP)

J C Penny Inc (NYSE:JCP) on Friday became the latest major retail brand to highlight the struggles of retailers. The company reported mixed results for the December quarter, or 4Q2016, and joined the chorus of retail footprint cutting. J C Penney said it will close at least 130 stores in the coming months and send 6,000 workers on early retirement. Those measures are expected to help the company prune costs and achieve more agility, but many investors have decided to distance themselves from the stock as seen the share price movement.

Shares of J C Penney pulled back more than 5.8% to close at $6.46 on Friday. The stock is down more than 22% year-to-date and has declined more than 32% over the last one year.

Investor worries over tough business environment for legacy retailers may have caused shares of J C Penney to tank.

Mixed quarterly earnings

J C Penney Company Inc (NYSE:JCP) generated revenue of $3.96 billion in 4Q2016, missing the consensus estimate of $3.98 billion. Revenue in the year-ago period was $4 billion. Sales at stores that remained opened for at least a year were down 0.7%, steeper than 0.3% decline that analysts expected on the average.

However, adjusted EPS of $0.64 in the latest quarter increased sharply from $0.39 a year ago and easily beat consensus estimate for $0.61.

Weak sales in the women’s category and continued competitive pressure from online retailers hurt J C Penney’s performance in the latest quarter.

Early retirement for workers

J C Penney Company Inc (NYSE:JCP) intends to buy out 6,000 workers as part of the measures to lower its payroll expenses. However, positions left by workers who choose to retire early will be filled by employees affected by the planned store closure. Perhaps that is a way to calm fears over massive job loss at a time when the Trump administration has focused on job creation as one of its signature agendas.

Amazon.com, Inc. (NASDAQ:AMZN), the disruptive online retailer that has caused problems for J C Penney and other legacy retailers, has pledged to add more than 100,000 full-time jobs over the next one and a half years.

Store closure

J C Penney is closing between 130 and 140 stores. The store restructuring is expected to save the company $200 million in annual expenses. However, the restructuring will initially cost $225 million.

In announcing store closure, J C Penney Company Inc (NYSE:JCP) has joined the ranks of Macy’s Inc (NYSE:M), Sears Holdings Corp (NASDAQ:SHLD) and other legacy retailers that are eliminating hundreds of jobs.

2/24/2017
Ticker Symbol JCP
Last Price a/o, 4:02PM EST  $                       6.46
Average Volume (mlns) 19.44
Market Cap (blns)  $                  2.11
Sales (blns) $12.58
Shares Outstanding (mlns) 327.38
Share Float (mlns) 303.26
Shortable Yes
Optionable Yes
Inside Ownership 1.00%
Short Float 23.29%
Short Interest Ratio 3.63
Quarterly Return -33.54%
YTD Return -22.26%
Year Return -22.73%

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy.

About the author: Monica Gray has an undergraduate degree in Accounting and an MBA – earned with Honors. She has six years of experience in the financial markets and has been a securities analyst for the past two years.

Author: Monica Gray

Monica has an undergraduate degree in Accounting and an MBA she earned - with Honors. She has six years of experience in the financial markets and has been an analyst for the past two years.

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