Fly Intel: What to watch in J.C. Penney earnings report

J.C. Penney (JCP) is scheduled to report results of its first fiscal quarter before the market open on Tuesday, May 21, with a conference call scheduled for 8:30 am EDT. What to watch for: 1. TURNAROUND EFFORTS: Analysts and investors will listen for comments from the retailer on its cost cutting moves. Last year, J.C. Penney reduced payroll, froze overtime and took other major cost cutting steps as it faced "an expense challenge." J.C. Penney management has said the company would continue to be "aggressive" on cost cutting. Last August, J.C. Penney said it plans to cut $250M in inventory by 2019. The company said last quarter that it will close 18 full-line stores in 2019 and nine ancillary home and furniture stores. It said gross margin improvement remains a "major" focus. 2. STRATEGY SHIFT: J.C. Penney announced in early February that it will stop selling major appliances in order to improve financial performance and drive profitable growth. Additionally, the struggling retailer said it will mostly stop selling furniture, instead focusing on its "legacy strengths" in apparel and "soft" home furnishings, which it said represents higher margin opportunities. Additionally, in February, J.C. Penney pulled the plug on a clothing subscription service established in 2017 through a partnership with Bombfell.com that offered private label and national men's clothing brands to people who signed up for regular apparel shipments. 3. COMPETITIVE LANDSCAPE: Mall-based retailers, including J.C. Penney, have been hurt by the increasing popularity of fast-fashion retailers like Zara, Forever 21 and H&M. The current promotional environment as well as tourism sales and a shift to e-commerce has been a focus for many retailers as of late. Last October, Sears (SHLD) filed for bankruptcy. At the time, the company said it intends to stay in business, keeping open stores that are profitable. Macy's (M) reported earnings per share last week that crushed analysts' expectations, though its revenue was basically in line with expectations. 4. EXECUTIVE TURNOVER: J.C. Penney announced in February that Michelle Wlazlo, who previously served as senior vice president of apparel and accessories merchandising at Target (TGT), would become its executive VP, Chief Merchant. During the quarter, the retailer appointed Vitamin Shoppe's (VSI) Bill Wafford as its CFO, and most recently named Steve Whaley as principal accounting officer and controller. Whaley was with Walmart (WMT) for over eleven years where he served as the senior VP and controller, principal accounting officer.

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