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This article was published 10/8/2012 (1362 days ago), so information in it may no longer be current.
NEW YORK -- J.C. Penney Co. CEO Ron Johnson hasn't run out of magic yet, as far as Wall Street is concerned.
The former Apple executive's soothing words drove the chain's stock higher even after the company offered up grisly details Friday of a terrible second quarter.
The midpriced department store chain reported a bigger-than-expected loss and plummeting sales. Shoppers are still not buying into a bold new pricing strategy. Penney even withdrew its full-year profit guidance.
The department store lost $147 million, or 67 cents per share, in the quarter ended July 28. That compares with net income of $14 million, or seven cents per share, a year ago.
Revenue tumbled almost 23 per cent to $3.02 billion.
The bleak performance marked the second straight quarter of severe sales declines since Penney got rid of most steep temporary discounts in favour of everyday lower prices. The report confirmed it's going to be a hard sell to shoppers who are used to big sale signs and coupons.
Yet, after feeling a bit queasy in premarket trading, investors pushed up Penney's stock by as much as nine per cent after investors were reassured on a 90-minute conference call.
By early afternoon, shares were still up almost six per cent at $23.33. The gains show Wall Street still wants to believe the mastermind behind the success of Apple's retail stores and Target's cheap-chic strategy has the magic to deliver.
"The more he sells the hope, the more investors are buying into it," said Brian Sozzi, chief equities analyst for research firm NBG Productions, who is still staying on the sidelines.
Johnson, wearing a navy blue blazer, white shirt and blue jeans, remained confident and calm as he vowed he was sticking to the plan. He shared more details of his vision for creating a new breed of specialty department stores and said the latest fixes to simplify the pricing plan on Aug. 1 are resonating with customers.
He and CFO Ken Hannah also allayed concerns about how much cash the company has.
While admitting to mistakes in pricing and marketing, Johnson told investors, "I am completely convinced that our transformation is on track."
Under Johnson's stewardship, Penney is changing everything from the items it stocks to store design. But the riskiest move has been its pricing. The goal is to offer consumers more predictability so they will visit more often. That will help break the vicious cycle of discounting that has soiled the brand, a laggard behind Macy's Inc. and other competitors.
Penney's stock is beaten up -- still down by nearly half since peaking above $42 in the afterglow of Johnson's hiring. And business can't get any worse, said Ron Friedman, head of the retail and consumer products group at accounting firm Marcum LLP.
"People are optimistic. They really believe in him," Friedman said. That goodwill means Johnson has at least another year to deliver, he said.
-- The Associated Press