JC Penney shares skid after UBS cuts fourth quarter sales outlook
By Phil Wahba
(Reuters) - Shares of J.C. Penney Co Inc JCP.N slid as much as 8 percent on Friday after UBS said holiday-quarter sales would likely be worse than it had expected and it questioned the retailer's ability to roll out new shops on schedule.
Penney, which operates 1,100 department stores, last January announced a bold turnaround plan that called for the elimination of most coupons and sales events, along with the eventual transformation of each of its 700 largest stores into a collection of 100 shops for brands like Levi's and PVH Corp's (PVH.N: Quote) Izod.
But customers, trained to respond to discounts, balked at the new pricing, leading to a dramatic deterioration in business. The company suffered a 26.1 percent drop in sales at stores open at least one year in its fiscal third quarter ended October 27.
UBS analyst Michael Binetti, in a research note, lowered his forecast for Penney's fiscal fourth quarter, which closes later this month and includes the holiday period. He now expects same-store sales to decline 28 percent, compared with an earlier projection for a 20 percent decline.
Penney is expected to report quarterly results in late February.
UBS downgraded its rating on Penney's stock to "sell" from "neutral" and set a price target of $13, down from $21.
Shares of Penney were down 4.6 percent to $18.26 in afternoon trading, after falling as low as $17.61 earlier.
Pressured to improve its performance, Penney did relent on its no-discounts approach last month, with signs in stores clearly showing markdowns, and offered shoppers "gift" coupons, moves that Binetti said would dent gross profit margin. Continued...