US department store JCPenney has witnessed comparable sales drop 5.4 per cent over the December holiday period, and confirmed the closure of three stores over the “next few months” as part of an ongoing evaluation of its store portfolio.
The retailer, however, reaffirmed it expects to generate a positive free cash flow in fiscal 2018, while reducing inventory in excess of $225 million, or 8 per cent, and end the year with liquidity in excess of $2 billion.
According to GlobalData Retail managing director Neil Saunders, JCPenney went into the festive season in a weakened state and, as such, was not able to capitalize on the favourable trends as other retailers potentially were.
“Stores, for example, were densely packed full of merchandise and provided consumers with a less than inspiring shopping experience,” Saunders said.
“The same is true online where a vast array of products with few standout items reduced conversion rates. Extensive discounting did little to remedy these weaknesses or stimulate revenue growth.”
Saunders noted the retailers biggest problem area is in its apparel category, where it continues to lose customers and market share, having a knock-on effect in other sectors of the business such as home and electronics.
“In essence, unless the issues in clothing are corrected, JCPenney will remain in a death spiral,” Saunders said.
Additionally, while the business made efforts to boost sales in the toy category over the holidays, likely trying to fill the gulf left behind by the bankrupt Toys ‘R’ Us, the overall impact was lackluster.
“In typical fashion, toy departments lacked discipline… with the presentation, merchandising and ranging all leaving a lot to be desired,” Saunders said.
“Against stiff competition from other players, this approach was simply not good enough to drive trade.”
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