Shares of J.C. Penney (JCP) took a beating Friday after the department store chain reported an unexpected sales decline and slashed it full-year sales forecast, raising new concerns about the viability of its turnaround.
The retailer said comparable sales fell 0.8%, while Wall Street was expecting them to rise 2.7% according to Consensus Metrix. What’s more, J.C. Penney now expects them to only be up between 1% and 2% for the fiscal year ending in January, which is way down from the 3% to 4% range it had previously given, suggesting softer expectations for the key holiday season that has just begun.
Penney shares dropped 9% in premarket trading.
The company blamed soft apparel sales for the shortfall, a scary development for a chain that gets 60% of its sales from clothes.
The news alarmed investors, because they’ve come to see Penney as a comeback kid among department store chains in the last two years, consistently besting rivals like Macy’s (M) and Kohl’s (KSS) since Penney almost went under in 2013 after a failed attempt to become trendier.
As detailed in a March cover story in Fortune, Penney has beefed up its private-label apparel, relaunched the sale of appliances to take advantage of Sears’ problems, and improved its tech and e-commerce.
The company’s third-quarter adjusted loss per share was $0.21, in line with analysts’ forecasts. Net sales missed forecasts, at $2.86 billion vs. $2.95 billion
Trying to sound a note of optimism, Penney CEO Marvin Ellison said in a statement that business had picked up more recently, particularly helped by sales of appliances at 500 of its 1,000 stores, a business it re-entered this year after a 33-year absence.
“We view our October sales results—specifically our acceleration in the last two weeks of the month—and the benefit from appliances as examples of what we expect for the balance of the fourth quarter,” Ellison said in a prepared statement.
Penney stuck to its forecast that it would generate $1 billion in profit after tax, depreciation, interest and amortization, something sure to soothe the debt-laden company’s lenders.
Still, the store’s performance in apparel was all the more disappointing given that Kohl’s on Thursday said it had had a “strong” back-t0-school season, which is both retailers’ second-most-important time of the year after the holidays.