Closing weak stores doesn't solve all of a retailer's problems. J.C. Penney Co. posted a wider quarterly loss, as liquidation sales at stores it closed during the period weighed on the company's results.
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Penney shares tumbled more than 15% in Friday morning trading as investors responded to weaker-than-expected profit margins.
Penney closed 127 stores in the latest quarter. Penney CEO Marvin Ellison said the retailer had never liquidated that many stores at one time, which made forecasting difficult. But he added: "We walked away from the liquidation event a stronger company."
Penney said in February it would close as many as 140 of its roughly 1,000 stores, joining rivals such as Macy's Inc. and Sears Holdings Corp. that have been shutting locations this year. Penney said it would use the savings to focus on revamping stores in stronger markets.
Sales at stores open at least a year fell 1.3% in the quarter ended July 29, better than the 3.5% decline in the previous quarter, a pattern similar to that reported by Macy's Inc. and Kohl's Corp. on Thursday.
But the improved sequential results weren't enough to reassure investors, who have soured on the department-store sector. Penney's shares initially dropped more than 20% in premarket trading, but recovered some ground to change hands at $4.03 a share. They are down about 60% over the past year.
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Foot traffic has steadily slowed at brick-and-mortar stores as shoppers increasingly turn to Amazon.com Inc. and e-commerce to spend their dollars.
Penney has been adding new categories such as appliances and revamping its beauty salons to differentiate itself from competitors. It plans to add a toy section in time for the holiday season. And it is revamping its women's apparel offerings, which continue to be a weak spot, by focusing on more casual clothing, including the addition of a new line from the contestants of the "Project Runway" television show that will debut this fall.
"We were slow to react to the changes in how women dress," Mr. Ellison said. Although he said he is encouraged by improvements in the category, he doesn't expect apparel sales at existing stores to turn positive this year.
The company posted a second-quarter loss of $62 million, compared with a loss of $56 million a year earlier. Revenue edged up 1.5% to $2.96 billion, from $2.92 billion a year earlier.
Mr. Ellison said strong early back-to-school sales in August boded well for the second half of the year, keeping the company on track to meet expectations. J.C. Penney reaffirmed its full-year guidance, including earnings per share of 40 cents to 65 cents, and comparable-store sales of negative 1% to positive 1%.
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com
(END) Dow Jones Newswires
August 11, 2017 11:10 ET (15:10 GMT)