Beleaguered retailer J.C. Penney, struggling to boost slumping sales and tanking traffic through an intense revamp, said in its annual report that the turnaround "may take longer than expected" and that the results "may be materially less than planned."
The document, filed with the Securities and Exchange Commission on Wednesday, shows a company careful not to be too confident in its rebirth strategy.
"There is no assurance that we will be able to successfully implement our strategic initiatives," J.C. Penney wrote in the report.
Chief Executive Ron Johnson has been swatting off criticism from Wall Street over his handling of the chain, whose revenue plunged 25% in the last fiscal year. About 19,000 workers lost their jobs in the last year.
The company is in legal mediation with home goods doyenne Martha Stewart and department store rival Macy's Inc. over allegations that it breached an exclusivity contract.
The chain has suffered a "prolonged decline in sales," substantially fluctuating stock price and several credit rating downgrades as it implemented "changes in our pricing strategy, corporate branding, marketing, store layout and merchandise assortments," according to the report.
Improving performance depends on many factors, "some of which are beyond our control," J.C. Penney wrote. Among those: a "highly competitive industry," unemployment rates and other economic factors such as the housing market, energy costs, consumer confidence and even weather conditions.
But there are also concerns of its own creation.
J.C. Penney hasn't been in the habit of paying bonuses or boosting salaries in the past year, which may cause employee flight and make it difficult to attract top talent, according to the report. The recent layoffs and high turnover rate have already caused institutional knowledge to deteriorate; now the company warns that it "could have additional workforce reductions in the future."
The merchandise and pricing changes could confuse customers and distract management, possibly causing a pileup of excess inventory, according to the report. If foot traffic continues to slide, the company said it may need to increase markdowns or change its marketing strategy again.
As of Feb. 2, J.C. Penney operated 1,104 department stores, including 80 in California.