J.C. Penney Stuck in Halloween While Lowe's is on to Thanksgiving

Joel Anderson |

retail, shopping, holidays, CEO, Ronald Johnson, earnings, quarterly, report, home improvement, store closings, early retirement plan, charges, costsRetailers Lowe's Companies, Inc. (LOW) and J.C. Penney Company, Inc. (JCP) both posted Q3 earnings reports yesterday before market open. As the markets prepare for a week of new reports from retailers, investors are wary of how earnings reports affect the outlook for the all-important upcoming Holiday season.

A Penney Earned, A Penney Lost

Ronald Johnson, the executive responsible for Apple Store, took over as the new CEO for J.C. Penney on Nov. 1 and is hoping to re-energize the company by fundamentally change retail shopping. Unfortunately, Johnson did not have good news to bring his new shareholders during his first conference call. J.C. Penney, the nation's third largest department-store chain, posted a Q3 loss of $143 million or $0.67 a share, a significant swing from the $44 million or $0.19 per share profit from a year earlier. The loss was partially related to the $265 million in charges for Q3, including $179 million for a voluntary early retirement plan as well as costs related to the disposal of an outlet business and improvements in the supply chain. However, the report also featured a gloomy outlook, with sales at stores open at least a year, considered a key statistic, dropping 1.6 percent and overall sales dropping 4.8 percent. J.C. Penney is forecasting between $1.05 and $1.15 per share in profits excluding costs for Q4, probably undershooting expectations of $1.14 per share. All this contributed to J.C. Penney's shares losing 2.77 percent of their value Monday.

Store Closing Mean Lower Earnings, but Outlooks are High

Lowe's also announced its Q3 earnings Monday morning. Lowe's reported that profits were only $225 million or $0.18 per share, down from last year's $404 million, or $0.29 per share. However, sales grew 2.3 percent to $11.0 billion, driven by same-store sales growth of 0.7 percent. Excluding charges related to store closings, the earnings numbers actually beat Street estimates, and Q4 guidance of full-year sales growth between 2 percent and 3 percent should beat prior forecasts of just 2 percent. On the whole, Lowe's efforts to streamline their company by closing existing stores and scaling back plans for new stores was met positively by investors as shares gained 1.69 percent in trading Monday.

Busy Week Ahead, Behind

As most of the major retailers continue to release earnings reports, investors continue to speculate on the quality of the upcoming Holiday Season and what that will mean to share prices and the economy as a whole. Macy's, Inc. (M) was among several companies that released strong earnings reports, with an EPS of $0.32 beating analyst predictions by $0.16. However, their disappointing Q4 guidance, $1.52 to $1.57 per share versus estimates of $1.66 per share, lead to a sell-off and could mean bad things for the upcoming Holiday season. Most eyes, though, are trained on the upcoming release of quarterly reports by The Home Depot, Inc. (HD) and Wal-Mart Stores (WMT), both of which can serve as bellwethers for the broader national economy.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
AAPL Apple Inc. 113.95 0.86 0.76 29,631,374
AEE Ameren Corporation 50.36 -0.20 -0.40 2,037,789
HD Home Depot Inc. (The) 128.27 1.45 1.14 5,751,016
JCP J.C. Penney Company Inc. Holding Company 9.55 0.00 0.00 12,113,803
LOW Lowe\'s Companies Inc. 71.76 0.26 0.36 8,176,164
M Macys Inc. 36.10 -0.50 -1.37 4,994,340
WMT Wal-Mart Stores Inc. 71.79 -0.54 -0.75 6,184,932

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