Today's story stock is JC Penney Co. (NYSE:JCP). This morning JC Penney slashed its first quarter sales and earnings forecasts and blamed slowing consumer spending for the warning. The statement from JCP said that it expects to earn about 50 cents per share, far lower than the previously projected 75 to 80 cents per share in the first quarter. They also projected that same-store sales will post declines in the "high single-digits." The company also hinted to the fact that it had been holding out hope for strong Easter sales, but even those were very disappointing.
On the web as well as on the television today the focus seems to be on whether this is a company specific problem or simply a major consumer spending problem that other retailers will also be subject to? Most believe that JC Penney is going to be far from the only retailer with this kind of sales slump. The likelihood of others in JCP's space having to preannounce negative earnings surprises is extremely high in my opinion. With consumer sentiment numbers falling off a cliff, it should come as no surprise that consumer spending could be hurting retailers quite a bit right now.
JC Penney is a company that has had a lot of ups and downs in previous years. In the period from 1998 to 2003 the company slumped drastically and was very frequently behind the curve in the retail space. Around the beginning of 2005 the company brought in some new management which really seemed to get things going nicely. In fact, just last year in February JCP was trading at a multi-year high of $85 a share. In late 2007 and so far this year the company has slumped again, although it would only be fair to point out that most retailers have not performed well at all during this period. As of right now, JCP stock sits just under $38 a share, about the same level it traded at 4 years ago.
JC Penney will not be alone in warning of slowdowns in consumer spending hurting its business, the challenge for them and all the rest of their peers will be to be ahead of the curve when spending begins to pick up again so they can fully benefit.
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