J.C. Penney and Lowe’s made headlines on Friday with dismal fourth-quarter earnings results and bleak forecasts that underscored just how much the nation’s retail sector is feeling the blow of the economic downturn.
J.C. Penney Co. (JCP)
The department store chain saw its profit plummet more than 50% in the fourth quarter as consumers held onto their wallets in what was a markedly less cheery holiday season for retailers. The company also issued a first-quarter forecast weaker than what analysts were predicting.
For the three months ended Jan. 31, the Plano, Texas-based retailer reported a net income of $211 million, or 95 cents a share, compared with a net income of $430 million, or $1.93 a share, during the same period a year ago.
Sales for the quarter came in at $5.76 billion -- a 9.8% drop from $6.39 billion a year earlier. J.C. Penney’s same-store sales, or sales in stores opened at least a year, fell 10.8% despite moves to battle light customer traffic.
The results, although grim, beat Thomson Reuters analysts’ per-share estimates of 92 cents and matched in revenue.
"Throughout the year, we took steps to significantly reduce our inventories and operating expenses in order to withstand the impact of the economic conditions. At the same time, we stepped up the style we offer and focused on effectively communicating the newness, excitement and value in our merchandise,” said J.C. Penney Chairman and CEO Myron E. Ullman III in a statement.
The company is projecting a first-quarter loss of 20 cents to 30 cents. Analysts polled by Thomson Reuters were expecting a loss of 19 cents, on average.
The retailer also said it would hold its annual meeting in New York on April 22 as opposed to in Plano, Texas, given the fact that many firms’ travel budgets have been snipped.
Lowe’s Cos. (LOW)
The nation’s No. 2 home-improvement chain posted worse-than-expected fourth-quarter earnings results and issued a full-year forecast that also fell short of Wall Street’s estimates.
For the three months ended Jan. 30, the Mooresville, N.C.-based retailer said it earned $162 million, or 11 cents a share -- a 60% decline from the $408 million, or 28 cents a share, it earned during the same period a year earlier.
The company said sales fell 4% to $9.98 billion and same-store sales fell 9.9%. Analysts polled by Thomson Reuters were expecting a profit of 12 cents per share on sales of nearly $10.1 billion.
"The economic pressures on consumers intensified in the fourth quarter, resulting in a further decline in consumer confidence and dramatic reductions in consumer spending," said Lowe’s Chairman and CEO Robert A. Niblock in a statement. "As a result, our comparable store sales for the quarter remained weak and fell at the low end of our expectations.”
The company said the “extreme promotional environment” driven by competition and cutbacks in consumer spending led the company to take more markdowns than expected, reducing its inventory, but cutting into its bottom line. The company also said it has taken steps to adjust its staffing needs in response to the “slowing” retail environment.
Going forward, the company said it expects full-year earnings of $1.04 to $1.20 a share -- a drop from the $1.27 analysts were expecting. The company said its revenue could decline as much as 2% or increase as much as 2%, and predicts same-store sales will slide between 4% and 8% for the year.
The company said its first-quarter earnings will fall between 23 and 27 cents a share, compared with analysts’ estimates of 32 cents a share. Revenue for the quarter is expected to decline as much as 3% or increase by as much as 1%.
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