- JCPenney slashed third-quarter profit forecasts amid an effort to liquidate less-popular products from its stores. The lowered guidance spurred a stock price plunge that reached as much as 25%.
The company’s stock dropped by as much as 25% on Friday after the retailer cut third-quarter profit forecasts. The department store expects to see a loss of $0.40 to $0.45 a share in the period, far worse than analyst expectations for a loss of $0.18 a a share. JCPenney is set to report results on November 10.
The plunge brings JCPenney’s year-to-date decline to 56% as it struggles to adjust to a retail environment where companies are either being crushed by Amazon or partnering with the Jeff Bezos-led juggernaut to stave off extinction.
And the reckoning has been coming for some time. Earlier this year, JCPenney announced the closing of 138 stores.
The company’s third-quarter forecast cut is part of a new initiative to liquidate unpopular items, which has resulted in higher costs for the period. If it’s any consolation – which it doesn’t appear to be for investors ruthlessly selling its stock – JCPenney says it will see a gain in same-store sales in the third quarter.
One thing that can be said about JCPenney’s decision to lower its forecast two weeks before its earnings report is that it’s getting much of the stock price damage out of the way beforehand. This may prompt some investors to scoop up shares at a more attractive valuation with hopes the company will beat the trimmed estimates.
If JCPenney fails to meet even the greatly tempered forecasts it’s provided, then that could be a different story. That could deepen the stock’s nightmare even further.
- Markets Insider