J.C. Penney Company, Inc. (JCP) badly needs a CEO, yesterday.
As the results showed on Thursday, the company also needs a clear strategy and vision.
The shares dropped 27% to $1.76 per share after lackluster results. The company lowered its full-year guidance to a loss of $0.80-$1 per share, compared to projections of $0.07-$0.13 per share. It posted a $101 million net loss or $0.32 per share.
Bank of America Corp. (BAC) downgraded the company on Thursday to Underperform.
The departure of CEO Marvin Ellison in May after a four-year tenure put pressure on the company management to find replacement promptly, revealing a lack of coherent strategy to get the company back on track. Marvin Ellison joined Lowe's Companies, Inc. (LOW) as the CEO.
"There are so many other retailers who have differentiated themselves and created unique shopping experiences driven by loyalty programs, coupons, promotions and differentiating merchandise," Feinseth said. "They just don't connect with the consumer anymore."
Across the balance sheet, there are signs of disarray.
Total sales declined 7.5% to $2.76 billion compared to a year ago. The focus on "women and children" seems oddly broad, when women make up 85% of all consumer purchases and 75% of women identify themselves as primary household shoppers."We are confident that our renewed focus on women is having a beneficial impact, evidenced by the positive comp sales performance in women's and children's apparel, both of which meaningfully out-performed our total Q2 comp results," said Jeffrey Davis, chief financial officer.
In recent years the company attempted focusing on millennials and is now concentrating on middle-aged moms, but it is unclear this strategy will help differentiate J.C. Penney's offering from competitors.
In terms of share performance over the past month, J.C. Penney falls behind its competitors with the exception of Sears Holdings Corp (SHLD) .
Since Ellison jumped ship, the company has been led by five executive vice presidents: Jeff Davis, Therace Risch, Marci Grebstein, Brynn Evanson and Mike Robbins. Among these five, Brynn Evanson is the only one who has served at the company for longer than three years.
The challenge for J.C. Penney is that there is no quick fix to find new products they can sell better than the competition to help offset their struggles in the apparel segment of their business, says Ivan Feinseth, director of research and chief executive officer for Tigress Financial Partners in New York City.
Feinseth added he believed J.C. Penney's expansion into selling appliances was a misstep because it is an area that is already a calling card for Lowe's and Home Depot Inc (HD) .
To its credit, the company does seem keen to get a new CEO through the door, with board chairman Ronald W. Tysoe acknowledging the top management job is the "top priority" for the board.
"Gross margin is a major focus for J.C. Penney, but our results have not delivered," said Trent Kruse, Vice President of Investor Relations. "We know that with the right actions and rigor surrounding inventory management, we have opportunities to improve our current productivity and turns as well as effectively manage planned receipts, improve gross margin levels and optimize our working capital to increase free cash flow."
Standard & Poor's has issued a negative outlook for the company as of May 2018.
The biggest short-challenge is find the right CEO to lead the embattled retailer.
"There is a strong correlation between CEO longevity and share price gains," Feinseth said. "Most companies that perform well have a CEO that has been there a long time. Companies with a revolving door of leadership suffer."
The next J.C. Penney chief executive will have their work cut out for them.
- Martin Cassidy contributed to this article.