Losses mounted amid the retailer’s remake. The company lost $348 million, or $1.58 a share, for the first quarter ended May 4. That was heads above the $163 million loss, or $0.75 a share, in same quarter a year ago.
Total revenue sank to $2.6 billion, a 16.4% decrease from Q1 of 2012. Comparable sales were down 16.6%.Analysts were looking for a loss of $1.06 a share on revenue of $2.7 billion.
Following the moribund report, new CEO Mike Ullman said, “Our objective is to put J.C. Penney Company, Inc. (NYSE:JCP) back on a path to profitable growth. We are looking forward, not back, and undertaking initiatives to ensure we have a successful future.”
The company blamed the “ongoing transformation of the home department” for the lackluster showing.
Penney’s was referring to the legal battle it’s embroiled in with rival Macy’s, Inc. (NYSE:M) over the right to sell some home goods by Martha Stewart Living Omnimedia, Inc. (NYSE:MSO).
Macy’s, Inc. (NYSE:M) sought to block J.C. Penney Company, Inc. (NYSE:JCP) from selling the domestic diva’s line under the name JCP Everyday. Macy’s maintains that selling the products infringes on its exclusive contract with Martha Stewart Living Omnimedia, Inc. (NYSE:MSO).
While a New York judge ruled in favor of Penney’s, at least until a lawsuit that Macy’s is waging against J.C. Penney Company, Inc. (NYSE:JCP)’s and Martha Stewart is fully decided, the judge cautioned the ruling was only preliminary. Penney’s could still face costly damages if Macy’s prevails.
Martha Stewart Living Omnimedia, Inc. (NYSE:MSO) could certainly use the dual exposure. The company has been trying to turn itself around. It’s showing scant progress.
In November, Martha Stewart Living announced that it was downsizing its magazine and cutting publishing jobs to focus on digital content.
The New York-based company lost $3.3 million, or $0.50 a share in Q1 2013. That compares with a $3.6 million loss, or $0.05 per share loss in the same period a year ago.
Martha Stewart Living Omnimedia, Inc. (NYSE:MSO) has a storied past, making its IPO debut on Oct. 19, 1999, at $18 per share. The stock soared to $38 by the end of its first day trading as a public company. However, things spiraled downward from there. By February 2002, shares sunk to $16.
After Ms. Stewart was convicted of insider trading in March 2004, shares plunged. Over the last 52 weeks, shares have changed hands between $2.48 and $3.81. It’s a wonder the company is still standing.
Meanwhile, Macy’s, Inc. (NYSE:M) has been a standout.
First-quarter profit jumped 20%, above estimates, and posted robust revenue.
The department store chain also boosted its quarterly dividend by 25% to $0.25 a share, and announced a $1.5 billion increase to its share buyback program.
The dividend increase is Macy’s third in the past two years. And since resuming its share repurchasing program in August 2011, Macy’s has bought back some 60.3 million shares.
The impressive quarter is a result of Macy’s, Inc. (NYSE:M) new strategy of tailoring merchandise to local tastes, training staff, and focusing on using the Internet, its cache of stores, and warehouses to quickly get merchandise to customers.
J.C. Penney Company, Inc. (NYSE:JCP)’s could quickly impress Wall Street and enjoy a turnaround if it scrapped its retail business altogether and simply became a real estate play.
The company just inked a deal to borrow $2.5 billion backed by hundreds of its stores, distribution centers and Plano, TX headquarters (collectively appraised at about $4.1 billion).
The Wall Street Journal reports Penney’s has owned some of its real estate for so long that the cost it pays for space is often a fraction of its current value.
Subleasing its best performing 300 stores could bring in roughly $1.2 billion in rental income, according to a March report from International Strategy & Investment Group in New York.
Another option is to spin off its real estate as a separate real estate investment trust.
But, J.C. Penney Company, Inc. (NYSE:JCP)’s needs to act fast; the value of its real estate could falter if store profits continue to wane and brand value waivers.
Time is money.
The article Penney’s Value Lies in Its Real Estate originally appeared on Fool.com is written by Diane Alter.
Diane Alter has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Diane is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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