(Reuters) - J.C. Penney Co Inc (JCP.N) predicted a fall in same-store sales this year as it prepared for the holiday shopping season, reporting worse than expected quarterly results on Thursday due to heavy discounting aimed at righting the company.
Shares in the troubled department store chain dived 14 percent in early trade before recovering to gain just over 2 percent, as new Chief Executive Jill Soltau gave the first indications of her plans to turn a profit and avoid becoming the next big U.S. retail casualty.
Sales at J.C. Penney stores open for over a year fell 5.4 percent in the quarter ended Nov. 3 versus a 0.6 percent decline forecast by analysts, and the company said they would now fall in the low single digits for the full year.
Soltau, on a conference call with analysts, said the company had discounted heavily in the quarter to clear slow-moving products and would now review the frequency of promotional offers, its online operations and store footprint.
“While this will be a lengthy process, I understand the need for quick action,” she said.
J.C. Penney has struggled for years to excite consumers with its mid-priced range of apparel, style-conscious millennials instead choosing fast-fashion brands and online stores.
The Plano, Texas-based company has also changed strategy several times, alienating its core demographic of middle-aged and older women as it chased after younger shoppers.
In the third quarter results, the company also withdrew its annual earnings forecast, saying it needed to give Soltau and its interim financial chief more time to assess the business.
“Are they in an immediate danger of filing for bankruptcy? I don’t see that,” said Ken Perkins, the founder of research firm Retail Metrics.
“But if they don’t right ship and start to generate positive (comparable-store) sales and positive traffic, it does call it into question.”
A handful of major U.S. retail names have collapsed in the past two years and others, including Penney, have slashed jobs and closed hundreds of stores.
People familiar with the matter told Reuters on Wednesday that Sears Holdings Corp (SHLDQ.PK) was in the process of finalizing $350 million in critical bankruptcy financing that would keep the U.S. retailer open through the holidays.
J.C. Penney lost 52 cents per share in the quarter, marginally better than expectations of a loss of 56 cents.
Reporting by Aishwarya Venugopal in Bengaluru; Editing by Sai Sachin Ravikumar