Dive Brief:
-
J.C. Penney’s Q4 total net sales, not including credit card revenue, fell more than 9% to $2.09 billion. The department store swung to a $64 million net loss, from $19 million in net income a year ago, according to financial filings.
-
With one less week in its fiscal year last year compared to 2023, J.C. Penney’s total net sales, not including credit cards, fell 8.6% to $6.3 billion. The company swung to a $177 million loss, from $30 million in net income a year ago. Consolidated adjusted EBITDA fell more than 45% to $172 million.
-
The net loss comes “despite some reasonable cost control on general expenses,” and appears to be related to a write-down of inventory, according to GlobalData. J.C. Penney didn’t immediately return a request for comment on that or the results in general.
Dive Insight:
Last year’s top-line decline could have been worse, but nevertheless puts J.C. Penney at the bottom of the department store sector, according to GlobalData Managing Director Neil Saunders.
“While JCPenney has been trying to reinvent itself, 2024 was another lost year and did nothing to prove that the business is on a path to success,” Saunders said by email.
The results reflect the challenge faced by its new operating entity, Catalyst Brands. The formation of Catalyst early in the year brought J.C. Penney even closer to Authentic Brands Group, which has had a stake in the department store for at least two years. Mall REITs Simon Property Group and Brookfield bought the retailer out of bankruptcy in late 2020.
Authentic is not just an investor but also an exclusive licensing agent for certain brands, according to the recent filing. As of Feb. 1, Penney had paid no commissions (based on net revenue from those brands) to Authentic, its exclusive licensing agent for those brands, but in fiscal year 2024 did pay Authentic $11 million in royalty and related payments.
As of January, Catalyst includes brands whose IP is owned by Authentic and whose operations were previously run by Sparc Group, a venture with Simon, Authentic and others. Those brands now include Aéropostale, Brooks Brothers, Eddie Bauer, Lucky Brand, Nautica and Forever 21. Catalyst also runs J.C. Penney private labels and exclusives like Stafford, Arizona and Liz Claiborne.
Catalyst sold the U.S. operations of another Authentic brand, Reebok, almost immediately, and Forever 21’s U.S. operations filed for bankruptcy in March.
On Friday, Saunders called Penney’s turn from last year’s profit “into a sharp net loss ... the most worrying aspect of the results.”
“Fortunately, JCP’s financial structure and its position as part of a wider group mean this is manageable, but it is not healthy,” he said. “JCPenney has a better leadership team and there is a sensible vision for the company, but the journey to success is paved with problems and the destination is going to take quite some time to reach.”
