Weak sales cut profit for Penney

J.C. Penney Co. said Thursday that its fiscal third-quarter profit fell 9%, hurt by weak sales in September and October, and the department store operator slashed its fourth-quarter outlook.

Chairman and Chief Executive Myron E. “Mike” Ullman III said it was too early to gauge the strength of holiday traffic in stores, but he said the season would be marked by a lot of price cutting. He said the company would take a cautious approach in planning for next year.

Ullman insisted that the recent sales slump was a result of the weakening economy and housing market, not anything the company was doing wrong. He said Penney’s same-store sales had been better than those of rivals over the last few quarters.

“It’s not as if we got dumb all of a sudden,” Ullman said.

In the quarter ended Nov. 3, Penney’s earnings fell to $261 million, or $1.17 a share, from $287 million, or $1.26, a year earlier.

Excluding a gain of 14 cents a share from state and federal tax benefits, net income was $1.03 a share. Analysts on that basis had expected a profit of $1.01 a share, according to Thomson Financial.

Penney beat Wall Street’s profit target because it sharply lowered expectations after missing September sales goals.

Third-quarter revenue fell 1% to $4.73 billion, below the $4.76-billion forecast of analysts surveyed by Thomson.

Same-store sales, or sales in stores open at least one year, fell 3.5%. They are a key barometer of a retailer’s strength.

Penney said it expected to earn $1.65 to $1.80 a share in its fourth quarter, down from its earlier forecast of $2.41. Analysts were predicting $1.98 a share. The company said same-store sales would decline by a low-single digit percentage.

Its shares tumbled $2.40 to $44.33.

Plano, Texas-based Penney, which operates more than 1,000 department stores, said sales were good in early fall. But executives said sales weakened dramatically in September and October because of unseasonably mild weather and a weaker overall retail climate.