For the past week or so, analysts have been warning that JC Penney (JCP) would have a hard time living up to expectations at its Analyst Day today. It appears they were right.Getty Images
JC Penney said same-store sales would grow at a low-single-digit clip duringthe third quarter of 2014 fiscal year, down from its previous prediction of mid-single digits after a September sales slowdown. JC Penney also said its 2015 gross margins would increase significantly over 2014 and that it would be free cash flow would be positive.
Investors weren’t happy with the news, as shares of JC Penney dropped 11% to $8.17 today. S&P Capital IQ’s Efraim Levy explains why:
JC Penney shares are lower as it cut Q3 sales outlook after disappointing September sales. Even though management reiterated that other metrics for the quarter and full year were still on plan, and provided some outlook for future growth and improved profitability, some investors may be concerned about demand and what JC Penney also admitted (albeit no surprise) is a promotional environment. Near-term “conservative” margin outlooks were below historical levels. A bright spot was in-store Sephora retailing operations that are exceeding expectations and could provide additional growth.
What did everyone expect–that JC Penney would reach its former heights in record time?