2017 was an ugly year for the department store industry across the board, but J.C. Penney Company, Inc. (NYSE: JCP) had it worse than most. Shares of the venerable chain are down 63% with just over a week left in the calendar.
Expectations were high heading into the year, as the company seemed to be making progress in recovering sales and profits following the disastrous tenure of former CEO Ron Johnson in 2012. However, a series of disappointing earnings reports and growing concerns about the so-called "retail apocalypse" crushed the stock. Here's the year that was for J.C. Penney.
Image source: J.C. Penney.
Starting off on the wrong foot
Like much of the department store industry, J.C. Penney stock started sliding in the first week of the year after the company and its peers turned in underwhelming holiday sales numbers. Penney said that comparable-store sales slipped 0.8% during November and December, missing the company's guidance. CEO Marvin Ellison called the beginning of the period "challenging." As a result, the stock fell nearly 15% over a three-day period as its peers also sold off.
In February, in a sign of retrenchment, the company said it would close 130-140 stores in order to optimize its retail operations and bring its brick-and-mortar presence in line with its omnichannel strategy. While the store-closing announcement was not a big surprise -- it followed similar moves by Macy's (NYSE: M) and Sears Holdings (NASDAQ: SHLD), as well as other retailers -- it did mark an about-face from a statement Ellison made just a year before when he said the company wouldn't close any stores, because he saw them as crucial for driving e-commerce.
That shift in strategy seemed to indicate that those stores were underperforming the company's own targets or that the company itself was, making an aggressive change like closing more than 100 stores and laying off thousands of employees a necessary move in order to save the business.
Performance continues to lag
Investors hoping J.C. Penney would bounce back in its first quarter were disappointed again as sales continued to slump. Comparable-store sales fell 3.5%, their worst result in several quarters, and significantly lagged the company's full-year guidance of flat comps. The company noted particular weakness in women's apparel.
J.C. Penney maintained its full-year guidance, which included adjusted earnings per share guidance of $0.40-$0.65, but as my Foolish colleague Tim Green pointed out, that guidance now included a gain of $111 million on a sale of its Buena Park distribution facility. One-time windfalls such as real estate gains aren't normally included in adjusted earnings or adjusted earnings guidance, and without that, J.C. Penney's adjusted earnings guidance would have been around breakeven. Investors seemed to see through the ruse: The stock fell 14% the day guidance came out.