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Earnings preview: J.C. Penney needs a whole new plan in Q1

J.C. Penney Company Inc. (NYSE: JCP) is scheduled to report first-quarter 2019 earnings results on Tuesday, May 21, before market open. Wall Street expects the company to report a loss of $0.39 per share on revenue of $2.52 billion.

J.C. Penney has been struggling for a while with declining sales and profits due to failure to keep up with shifts in the retail landscape. The company has been dealing with falling store traffic and has announced several store closures for the year.

The retailer has been taking measures to improve its performance such as making changes to its product categories in order to focus on the high-margin ones. However, these steps have not been able to help the company much in driving growth and its margins and profitability continue to dwindle.

J.C. Penney is likely to suffer from these challenges in the first quarter and these might weigh on its top and bottom line results. The company appears to be in dire need of a whole new strategy to bring it back to its feet as the heated competition in the retail industry continues.

In the fourth quarter, J.C. Penney reported declines in revenue and earnings but the results surpassed market expectations, giving the stock a massive lift at the time. Revenues dropped 8.4% to $3.7 billion while adjusted EPS fell 64% to $0.18. Comparable store sales were down 4%.

J.C. Penney fourth quarter 2018 earnings infographic
J.C. Penney Q4 2018 Earnings Infographic

Last quarter, J.C. Penney announced it would close 18 full-line stores in 2019, along with 9 ancillary home and furniture stores. The retailer anticipates a pre-tax charge of approx. $15 million associated with these closures during the first half of 2019. Nearly all impacted stores are expected to close in the second quarter of 2019. The company expects free cash flow to be positive for fiscal year 2019.

J.C. Penney’s stock has gained 16% so far this year.

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