J.C. Penney Fiscal-Year Loss Near $1 Billion
February 28, 2013,
PLANO, Texas-J.C. Penney brought its fiscal year to an end in a flood of red ink, to the tune of $985 million for the year, up from the $152 million net loss from its previous fiscal year.
For its fourth quarter ending on Feb. 2, the retailer posted a net loss of $552 million, up from $87 million in last year's fourth quarter. The losses occurred on the back of steep declines in sales. For the year, sales fell 24.8 percent to $13 billion, while sales in the quarter plummeted 28.4 percent to $3.9 billion.
Same-store sales also fell precipitously for both periods. In the quarter, same-store sales were down 31.7 percent, while for the year comparable-store sales were down 25.2 percent.
Gross margin administered a major hurt to J.C. Penney's bottom line in the quarter. Gross-margin dollars fell 43.6 percent, and gross-margin percentage lost 639 basis points to 23.8 percent. Selling, general and administrative expenses were down 10 percent in dollars but rose 637 basis points as a percentage of sales, to 31.1 percent.
Speaking in a conference call to retail analysts yesterday, J.C. Penney CEO Ron Johnson said the retailer made mistakes in its quest to transform its business. Two of the mistakes Johnson said were doing away with sales and coupons in an effort to establish an everyday-low-price selling proposition. "So we have brought back sales" and "have brought back coupons," Johnson said.
Johnson also admitted that "our marketing didn't connect very well with our customers last year," failing to communicate "our unique value proposition." He said J.C. Penney has taken steps recently to bolster its marketing, including the introduction of "compare," which compares the everyday prices of key J.C. Penney products to prices found elsewhere; and Dear America Yours Truly, a campaign which conducts conversations with shoppers about the new brands now available at J.C. Penney. The company has hired Sergio Zyman, former Coca-Cola marketing executive and formerly head of his own consulting company, as a marketing advisor.
Johnson also said the new J.C. Penney home department would be unveiled in May. It will feature brand partners such as Martha Stewart, Michael Graves, Jonathan Adler and Sir Terence Conran, and brands such as Bodum, Calphalon, Oxo and Keurig.
Regarding the future, Johnson said, "I told you this will be a multiyear effort, and it will be. I told you transformations are unpredictable and can be bumpy, and this one has been." Nevertheless, "we greatly look forward to year two of our transformation."