Byline: Thomas J. Ryan

NEW YORK — Shares of J.C. Penney Co. fell 1 11/16 to 36 7/16 after the retailer said weak sales and margins at its department store and catalog would cause third-quarter earnings to miss Wall Street targets.
Wall Street’s consensus estimate was 81 cents a share, which compares with 68 cents a year ago.
Prudential Securities slashed its quarter estimate to 69 cents from 82 cents and lowered its rating on the stock to “hold” from “accumulate.” Prudential also cut its earnings estimate to $2.45 from $3 for the full year and to $3.30 from $3.48 for 2000. Penney earned $2.14 last year.
“I think the sale and earnings visibility is still clouded for J.C. Penney,” said Wayne Hood at Prudential Securities.
Penney said during a conference call that its 3.5 percent same-store decline in August at the department stores was below plan, even though 2 percent of the decline reflected a shift in a home furnishings promotion to July this year from August last year.
On the conference call, Eli Akresh, a Penney’s investor relations manager, said that the firm expects September sales “to recover from this August performance, but we still expect sales for the quarter in the flattish area. Store and catalog gross margins right now from the early part of August have not followed the increases that we experienced in the second quarter.”
Penney’s expects a September same-store increase of “no more than 1 percent” at the department store group.
“Overall, back-to-school sales in basic jeans are very soft while fashion jeans are selling very well,” said Stephen Blum, another investor relations manager, on the call. “Our private brand comp sales, led by Arizona Jean Co., St. John’s Bay and Delicates, increased in the high-single digits, while national brands decreased in the double digits.”
The poorest category in August was men’s, with same-store sales sliding in the low double digits. Blum said athletic apparel and footwear continued to show declines in the mid-teens while young men’s sportswear and tailored clothing dropped in the double digits.
Women’s apparel was the top performer, with gains in the low-single digits, led by a double-digit jump in misses’ casual sportswear. Dresses also “performed well,” led by its exclusive Crazy Horse and Joneswear brands.
Women’s accessories moved up in the low-single digits, led by cosmetics and sleepwear.
Children’s apparel and family shoes were flat, while home furnishings were down in the high-single digits due to the promotion shift.
On the bright side, Blum said Internet sales “continue to be very, very strong and we are continuing to add many new products to our site.”