J.C. Penney: Kicking Ron Johnson Will Not Make Profits Come Back

J.C. Penney Co. Inc. (NYSE: JCP) reported second-quarter 2013 results before markets opened this morning. The venerable retailer reported an adjusted diluted earnings per share (EPS) loss of $2.16, as well as $2.66 billion in revenues. In the same period a year ago, J.C. Penney reported an EPS loss of $0.37 on revenue of $3.02 billion. This morning’s results also compare to the Thomson Reuters consensus estimates for an EPS loss of $1.06 and $2.76 billion in revenue.

On a GAAP basis, J.C. Penney posted an EPS loss of $2.66, which includes a $0.99 per share charge for a loss associated with a tax valuation allowance. That hardly makes a difference.

The company's CEO said:

Since I returned to jcpenney four months ago, we have moved quickly to stabilize our business – both financially and operationally – and we have made meaningful progress in important areas of the business. There are no quick fixes to correct the errors of the past. That said, we have identified the challenges, put solid plans in place to address them and have experienced and capable people in key roles to do so. … Moving forward, we're focusing our efforts on regaining customer loyalty by offering trusted brands, award winning service and affordability that families can depend on.

Same-store sales fell 11.9% in the quarter. That awful performance was attributed to "the Company's failed prior merchandising and promotional strategies, which resulted in unusually high markdowns and clearance levels in the second quarter."

That is not all the previous CEO took a few lumps for. J.C. Penney's Home department dragged down same-store sales by 2.4% due to "the lengthy renovation and disappointing re-merchandising" of the department.

Okay, so former CEO Ron Johnson did not have the formula to turn around J.C. Penney's business. We get it. But maybe it is time to stop blaming him for all the company's ills and come up with better ideas than the ones that Johnson was brought in to fix in the first place.

Wisely, the company did not offer any guidance because it really does not have a clue. The consensus analysts' estimates call for a third quarter EPS loss of $0.80 on revenues of $2.96 billion. For the full year, the consensus estimate calls for a loss of $3.49 per share on revenues of $12.32 billion. Those estimates are now consigned to the dustbin of history. The situation will be much worse than that.

Shares are up 1.4% in premarket trading this morning, at $13.40 in a 52-week range of $12.34 to $32.55. Thomson Reuters had a consensus analyst price target of around $16.25 before today's results were announced.