The company reported an operating loss of $ 477 million on Tuesday in the three months ended May 2. That's far greater than the $ 93 million operating loss in the same period last year, and 40% more than the company warned investors it expected to report just three weeks ago, when it released preliminary results.
Much of the difference in the size of the actual loss from the previous estimate is due to an impairment charge for JCPenney's business. The good news for JCPenney is that taking such a charge will not cost you cash when you need to keep as much as possible. The bad news is that the business itself, like the value of its name, isn't worth that much, and that could limit your ability to raise the additional cash you need.
The company hopes to stay in business, but its ability to survive the bankruptcy process depends in part on whether it can limit losses and conserve cash. Many bankrupt retailers expect to remain operational but ended up closing. More recently, that happened to Pier 1, but it was also the fate of Toys "R" Us and other retailers.
JCPenney's net loss for the quarter reached $ 546 million, more than 250% of the prior-year loss. Revenue fell 53%, roughly in line with its previous forecast.
The drop in revenue was not surprising given that the company's 846 stores were closed during the middle of the quarter due to health concerns and requests to stay home related to the Covid-19 pandemic. They didn't reopen until May.
As stores began to reopen, the losses continued to increase. On Friday, JCPenney reported that preliminary results for the month ended June 6 included an operating loss of another $ 60 million.
JCPenney was regularly losing money before the Covid-19 pandemic. The company's most recent profitable year was 2010, and its net losses totaled $ 4.5 billion since then.
Since the summer of 2011, he has reported a net profit in just five quarters, all of them in the holiday shopping season. The company could not have made money without that increase in sales.
It reported a limited profit in the fiscal fourth quarter that ended in February before the Covid-19 outbreak in the United States, but profits fell 64% from a year earlier.
The company has begun maintaining store closing sales at 149 stores. It plans to close about 100 other stores by the end of next year. Those 250 stores would represent approximately 30% of the stores it had before the crisis.