J.C. Penney ‘pleased’ with holiday; analysts, not so much

J.C. Penney Co. said it’s “pleased with its performance for the holiday period� and reaffirmed its forecast for the fourth quarter.

The Plano, Texas, company, which has struggled with an identity crisis in recent years, said Wednesday that it is “showing continued progress in its turnaround efforts.�

Customers reacted well to the chain’s product selection in stores and online, according to J.C. Penney.

In November, the company said it expects sales at stores open more than a year to “improve sequentially� in the fourth quarter along with gross margin. The retailer also said it expects $2.85 billion in inventory at the end of the year as well as more than $2 billion in available liquidity.

Since the departure of controversial Chief Executive Ron Johnson in April, his successor Myron Ullman has returned J.C. Penney’s discounting cycle and house brands such as St. John’s Bay.

In late morning trading in New York, J.C. Penney stock was down more than 7%, or 60 cents a share, to $7.59.

Chuck Grom, an analyst with Sterne Agee, said in a note to clients that he’s skeptical about J.C. Penney’s announcement.

He said “the math suggests� that same-store sales for December might have fallen 6% to 7%. If the numbers were better, J.C. Penney would have released more detailed information than “a very short statement,� Grom wrote.

Other analysts have mostly deemed the holiday season to be ho-hum.

“A Merry Christmas and Happy Holiday it was not for many mall-based retailers,� wrote RBC Capital Markets analyst Howard Tubin in a note to clients. “A lack of new fashion was hard to overcome, and the ‘promotional lever’ was the only one left for several of the specialty retailers to pull.�

Discounts were deeper and began earlier, and even brands that normally refrain from dangling deals – such as Lululemon – began offering bargains, according to Tubin.

His outlook for spring is cautious, he wrote, noting that shoppers “have been trained and are now likely looking for these aggressive discounts to continue.�

One benefit from the season? Low inventory levels, according to Tubin.

“The rampant discounting and purging of winter and Holiday product should leave the channel clean of carryover and ready to receive new spring merchandise,� he wrote.�

Separately, NPD Group analyst Marshal Cohen blamed the lack of hot new products as “the biggest contributor to a sluggish growth number for holiday 2013� in a blog post this week.

In a survey of 1,000 consumers, NPD found that 52% believed “there was nothing new and exciting� among their choices for holiday gifts. Cohen said stores either refused to commit to innovative (read: risky) items or couldn’t find any on offer from manufacturers.

“Even those items that had some ‘fashion’ changes began to look stale as shoppers saw the same merchandise throughout the holiday season, during repeat visits to stores and online retailers,� Cohen wrote. “If they see the same merchandise over and over again, it becomes – dare I say it – boring. It’s no wonder why they expect the discounts to get bigger.�

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