New financial reports from both Macy’s and JC Penney show that while consumers may be shopping a little more enthusiastically, mainstream brick-and-mortar stores face a comeback trail even more challenging than first thought.
Not that anyone thought it would be easy. But a J.C. Penney filing with the Securities & Exchange Commission reveals the company’s first-quarter revenues sank to $1.08 billion in the first quarter, compared with $2.44 billion in the comparable period of 2019. And its net loss ballooned to $546 million, compared with a loss of $154 million in the year-ago period. Significantly, its operating loss of $477 was considerably worse than the $339 million that it warned investors about just two weeks ago.
But Footwear News reports that lawyers for the company say sales are improving, with 831 of its 850 units reopening. The report says that revenues from the reopened stores “had so far exceeded expectations — and that it had roughly $980 million in cash on hand at the end of June, besting its projected budget by about $100 million.”
While Macy’s position is not as dire as that of JC Penney, which filed for bankruptcy last month, Macy’s decline in revenues was steeper than observers had expected, falling to $3.01 billion in the first quarter, from $5.5 billion in the same period in 2019. It posted an adjusted net loss of $630 million, compared to net income of $137 million in 2019.
As infection rates continue to climb around the country, the Cincinnati-based chain warned that the road ahead was likely going to be bumpier. “While our stores are reopened, we expect that the COVID-19 pandemic will continue to impact the country for the remainder of the year,” says Jeff Gennette, Macy’s chairman and CEO. “We do not anticipate another full shutdown, but we are staying flexible and are prepared to address increases in cases on a regional level.”
Deutsche Bank analyst Paul Trussell commended Macy’s on its aggressive cost-saving actions and a prudent approach to the second half and is encouraged by improving traffic trends. But in his note on the company’s results, he says Deutsche Bank is maintaining its neutral stance. He writes that increases in COVID-19 cases could lead to a further slowdown in traffic, as has already happened in Texas. And as stores struggle to unload spring inventory, he notes there may be “an aggressive promotional backdrop, as well as higher shipping costs due to increased penetration of digital sales.”