J.C. Penney Loss Widens to $348M in Q1

Myron “Mike” Ullman said retailer is refocusing on the customer after failed transformation effort.

Exterior of J.C. Penney store.

The red ink flowed at J.C. Penney Co. Inc. in the first quarter, but chief executive officer Myron “Mike” Ullman 3rd is focusing on the future.

This story first appeared in the May 17, 2013 issue of WWD.  Subscribe Today.

“We’re looking forward, not back,” Ullman said on a conference call with analysts.

Penney’s net losses widened to $348 million, or $1.58 a share, from $163 million, or 75 cents, a year earlier. Excluding restructuring and management transition charges and other items, losses tallied $1.31 a share and were much steeper than the 86 cents Wall Street analysts projected on average.

Sales for the three months ended May 4 fell 16.4 percent to $2.64 billion from $3.15 billion.

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Penney’s burnt through $948 million in free cash flow during the quarter as it rolled out over 500 revamped home goods shops and made catch-up payments to vendors.

Ullman was careful not to get ahead of himself as he talked about Penney’s path forward after former ceo Ron Johnson’s efforts to cut price promotions and create a series of shops-in-shop fell flat and drove the company to losses of nearly $1 billion last year.

“We need to make a connection with the customer in a way that is meaningful as well as enduring,” Ullman said. “We are really listening to the customer and putting her first in everything we do. We need to get the right merchandise into the right place in the right time.”

Ullman is reemphasizing Penney’s private brands, such as St. John’s Bay, and looking to ramp up promotional marketing around key shopping periods. He is also bringing jcp.com back to the fore, working to better integrate the firm’s e-commerce business with the stores.

“We believe we can put J.C. Penney back on the pathway to profitable growth,” Ullman said, without being specific as to just when the company would get back into the black.

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The ceo said the retailer could recapture the sales it lost over the past year.

“I really don’t see many structural barriers,” he said. “The core of our business processes are in place.”

Ullman added: “We’re open for all customers. It became popular wisdom that somehow we didn’t want some customers and we wanted other customers.”

The ceo said he doesn’t expect new significant layoffs or a big wave of hiring as the company’s strategy is tweaked, in many cases back to what existed before Johnson’s tenure began in November 2011.

Ullman was positive, however, on cost cuts made in his absence.

“Having a lower expense structure is an advantage as we grow volume, coming back out of this abyss,” he said. “The level of expense reductions is probably about right.”