When JCPenney hired former Target chief marketer, Michael Francis, to serve as president, the company no doubt thought he would bring with him a bit of Target's magic. Now, about six months since he assumed his role at JCPenney, the company has undergone a number of personnel changes and the implementation of its new "fair and square" price strategy, and investors are waiting for it to pay off.
To be fair, as mentioned earlier, Francis hasn't been in is post at JCPenney for even a year, and it will take some time for consumers to get used to the idea of a "no sales" policy. Still, it will be interesting to see how the rest of the fiscal year shakes out.
For the first quarter, the company reported an adjusted net loss of $55 million or 25 cents per share, excluding markdowns taken as a result of the company's continuing efforts to reduce inventory levels to align with its new strategy, restructuring and management transition charges and non-cash qualified pension expense. On a GAAP basis, the company reported a net loss of $163 million or 75 cents per share. A reconciliation of non-GAAP adjusted net loss to the most directly comparable GAAP financial measure is included with this release.
Comparable-store sales for the first quarter declined 18.9%. Total sales decreased 20.1%, which includes the effects of the company's exit from its outlet business. Internet sales through jcp.com were $271 million in the first quarter, decreasing 27.9% from last year.
"Sales and profitability have been tougher than anticipated during the first 13 weeks, but the transformation is ahead of schedule. Customers love the new JCP they discover in our stores. Our shop strategy has been applauded by vendor and design partners, our merchants have stepped up to the challenge of improving our merchandise and presentation, we have dramatically simplified our business model and reorganized our teams at headquarters and in our stores. While we have work to do to educate the customer on our pricing strategy and to drive more traffic to our stores, we are confident in our vision to become America's favorite store. We fully expect that the bold and strategic changes we are making to our operations will result in improved profitability and sustainable growth over the long term," said Ron Johnson, CEO of JCPenney.
In light of charges related to simplifying its operations and adjusting its merchandise assortment, JCPenney said it no longer expects to meet its annual GAAP earnings guidance of $1.59 per share, but affirms its non-GAAP earnings guidance of $2.16 per share which excludes non-cash qualified pension expense, restructuring charges and markdown reserves as it transition its merchandise assortment.
Additionally, the company announced today that it will discontinue the 20 cents per share quarterly dividend. On an annual basis, this will result in cash savings of approximately $175 million, which will be used to help fund the broad-based transformation plan that JCPenney announced in January.