So much for being retail’s comeback kid.
J.C. Penney (JCP) on Friday reported weak holiday season sales, becoming the latest department store chain to disappoint investors with a lackluster performance despite forecasts for the best Christmas period for retail overall in years.
The retailer said comparable sales, which include e-commerce and sales at stores open at least a year, fell 0.8% in November and December. Penney’s report comes two days after Kohl’s (KSS)and Macy’s (M) each reported that comparable sales fell 2.1% over the holidays, and Sears (SHLD) said they fell 13%. Penney’s holiday numbers were all the more disappointing given its strong performance a year earlier.
Penney shares were down 5% to $7.56 in premarket trading, continuing a 7% decline on Thursday when many retail stocks plunged.
The poor results showcase department stores’ ongoing struggles to keep shoppers who are now less apt to visit several stores when they go to a mall, buy clothes online or at discount chains like TJX’s (TJX)T.J. Maxx, or shop for beauty products at booming specialty chains like (ULTA)Ulta Beauty.
In the case of Penney—which has been outperforming its immediate rivals in the last two years as it claws its way back to health from a disastrous effort five years ago to become hipper—the results are particularly disappointing given its big moves to stand out from other department stores. Penney has resumed selling appliances after 33 years, as part of its efforts to be less reliant on apparel, as well as get more bang for its buck in its home areas. It has also rebranded many of its beauty sales, the largest such chain in the U.S., and continues to expand its popular Sephora beauty shops.
J.C. Penney Chief Executive Marvin Ellison put the blame on a slow start to the season and said in a statement that things improved as the holiday period progressed. “The first three weeks of November proved to be challenging in stores, consistent with the trends in the broader retail industry,” he said.
On the positive side, Penney did well with appliances, Sephora and jewelry, and online sales grew by a double-digit percentage. And the company said it is still on track for a profit of $1 billion for the fiscal year ending this month.
Still, the holiday season decline comes after Penney reported sales drops, albeit modest ones, in the first and third fiscal quarters of the year, suggesting there are larger problems at work than a slow start to November—namely that Penney is not immune to the problems buffeting the department store sector. And more importantly, it is not seizing the opportunity to steal much market share from its struggling rivals.