JCP J C Penney Company Inc

By Suzanne Kapner and Khadeeja Safdar 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (March 1, 2019).

The cruel reality of retailing in America is that the annual holiday splurge is no longer enough to boost the fortunes of chains like J.C. Penney and Victoria's Secret that are struggling to draw in shoppers and compete online.

The two mall stalwarts reported declining sales for the holiday quarter and said they would close more stores this year, joining a parade of chains looking to shrink their footprints while giants like Amazon.com Inc. and Walmart Inc. grab more of consumers' spending.

J.C. Penney Co. reported sales in the latest quarter declined 6% at stores open at least a year. The retailer said Thursday that it would close 18 department stores, with more likely to follow. But the company also said it filled key management positions and was working to win back shoppers.

"Our customer wants us to be restored to greatness," said new CEO Jill Soltau, referring to the retailer's heyday as the go-to apparel retailer for middle-class shoppers. Penney operates more than 860 U.S. department stores.

Victoria's Secret parent L Brands Inc. said the company is reducing its capital investment in the lingerie brand, which reported a 3% decline in comparable sales in the holiday quarter. The company plans to close an estimated 53 North American stores in 2019, compared with the 15 stores it has closed on average annually in the past few years.

"Truly, everything is on the table," L Brands finance chief Stuart Burgdoerfer said Thursday on a conference call with analysts. Victoria's Secret and its sister Pink brand have more than 1,100 stores in North America.

U.S. chains had a mixed holiday season despite the strong economy, rising wages and low unemployment. Both Amazon and Walmart posted strong sales, as did electronics retailer Best Buy Co. and TJX Cos., whose off-price chains T.J. Maxx and HomeGoods continue to draw customers.

But Macy's Inc. barely grew sales during the holiday quarter and said it didn't expect any sales growth this year. And Sears Holdings Corp., long Penney's closest competitor, filed for bankruptcy last year and has closed hundreds of stores. Just this year, Payless ShoeSource and children's apparel retailer Gymboree have set plans to close hundreds of locations after filing for bankruptcy protection.

Ms. Soltau, who took over as Penney's CEO in October after leading fabric-and-craft retailer Jo-Ann Stores Inc., has been trying to craft a strategy to reverse slumping sales by discontinuing low-margin categories like appliances and furniture and focusing on the core apparel business. The company said sales in its women's apparel business at stores open at least a year grew 2% in the period.

Ms. Soltau told analysts on Thursday she is working to repair the fundamentals of retailing such as improving the product mix and clearing out excess merchandise. She also said she wants to simplify promotions and reduce losses from shrink, an industry term denoting theft or damage to goods.

Penney's net sales fell 10% in the three months that ended Feb. 2 to $3.67 billion. Profit was $75 million, down from $242 million the year prior.

Executives said liquidation sales from Sears stores hurt the business during the holiday period, as shoppers opted for lower-priced goods at Sears. The two retailers are co-anchors in dozens of malls around the country. Penney closed 140 stores in 2017.

Penney has hired a former Target Corp. executive as chief merchant and filled other key roles, including planning and allocation as well as asset protection, the company said Thursday. Its shares, which had sunk to just above $1 over the past year, jumped 28% to $1.59 in afternoon trading.

In a sign of the turmoil the company is still facing, Penney declined to provide financial guidance for the current fiscal year.

Last year, L Brands decided to close or sell its smaller brands, Henri Bendel and La Senza, to improve profitability and focus more attention on Victoria's Secret, which has been struggling since 2016. The company recently replaced its lingerie chief executive, brought back catalog mailings and teased a new swimwear collection after deciding to eliminate the category more than two years ago.

Victoria's Secret is facing more competition from large companies and upstarts powered by social media and e-commerce. Last week, Target said it would launch new brands to sell women's bras and sleepwear.

Shares of L Brands, which also owns Bath & Body Works, fell 9% in midday trading. The stock is down about 35% over the past year.

Write to Suzanne Kapner at Suzanne.Kapner@wsj.com and Khadeeja Safdar at khadeeja.safdar@wsj.com

(END) Dow Jones Newswires

March 01, 2019 02:47 ET (07:47 GMT)

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