Fourth-quarter same-store sales at JCPenney declined 1.8%, and the company lost $87 million, but those details are being overlooked for the time being as execution of the transformation strategy envisioned by CEO Ron Johnson began less than a month ago.
Costs associated with Johnson’s grand plan to transform JCPenney from a mid-tier also-ran to America’s favorite store were reflected in fourth-quarter results the company reported Friday morning. As previously announced, the company’s reported loss included restructuring and management transition charges which totaled 56 cents a share as well as the financial impact of actions taken to execute the company’s new “fair and square” pricing and promotional strategy, which lowered fourth quarter earnings by an additional 59 cents a share.
“While 2011 was a year of transition at JCPenney, 2012 will be a year of transformation,” Johnson said. “With this in mind, our associate teams worked tirelessly throughout the quarter to get the stores ready for Feb. 1. I want to thank them for their amazing efforts.”
Those efforts are expected to help the company produce full year 2012 earnings of at least $2.16 excluding additional charges related to execution of the company’s transformation strategy, which is focused on simplifying operations, minimizing promotional activities and enhancing the store experience with the infusion of propriety brands presented in a series of shops.
“As we embark on this transformation, the strategic changes we are making to our business model will dramatically simplify JCPenney’s operations, significantly lower the company's cost structure and create a platform for growth that will result in improved profitability in 2012 and beyond,” Johnson said. “We look forward to updating our shareholders, our vendors and other key stakeholders on our progress throughout the year, beginning in May 2012 with our first quarter earnings release.”
In the meantime, JCPenney saw fourth-quarter sales decline 4.9% to $5.4 billion and online sales decline 3.1% to $480 million. The sales decline resulted in a precipitous drop in gross margins, which fell to 30.3% compared with 37.6% the prior year as the company took higher mark downs and took pricing actions to shift to more of an every day low pricing model.
Undeterred by the sales weakness, Johnson said the company was confident that the benefits of a simplified business model would more than offset the sales decline and enable the company to meet or exceed its exceed earnings guidance.
For the year, the company said total sales decreased 2.8% to $17.3 billion and online sales were essentially flat at $1.5 billion. The company reported an operating loss for the full year of $2 million, which included $451 million of restructuring and management transition charges.