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Penney‚??s sales slip


February 16. 2013 3:26PM


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NEW YORK — J.C. Penney Co. CEO Ron Johnson hasn't run out of magic yet, as far as Wall Street is concerned.


The former Apple executive's soothing words drove the chain's stock higher even after the company offered up grisly details Friday of a terrible second quarter.


The midpriced department store chain reported a bigger-than-expected loss and plummeting sales. Shoppers are still not buying into a bold new pricing strategy. Penney even withdrew its full-year profit guidance.


The bleak performance marked the second straight quarter of severe sales declines since Penney got rid of most steep temporary discounts in favor of everyday lower prices. The report confirmed it's going to be a hard sell to shoppers who are used to big sale signs and coupons.


Yet, after feeling a bit queasy in premarket trading, investors pushed up Penney's stock price by as much as 9 percent after Johnson reassured investors on a 90-minute conference call.


"The more he sells the hope, the more investors are buying into it," Brian Sozzi, chief equities analyst for research firm NBG Productions who is still staying on the sidelines.


Under Johnson's stewardship, Penney is changing everything from the items it stocks to store design. But the riskiest move has been its pricing. The goal is to offer consumers more predictability so they will visit more often. That will help break the vicious cycle of discounting that has soiled the brand, a laggard behind Macy's Inc. and other competitors.


Penney's stock is beaten up — still down by nearly half since their peak above $42 in the afterglow of Johnson's hiring. And business can't get any worse, said Ron Friedman, head of the retail and consumer products group at accounting firm Marcum LLP.


In the second quarter, revenue tumbled almost 23 percent to $3.02 billion. Revenue at stores open at least a year fell 21.7 percent, worse than the 18.9 percent drop the quarter before. Customer counts fell 12 percent.


Investors also seemed to embrace Johnson's more detailed vision laid out Friday for rejuvenating the Penney store experience.




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