NEW YORK: J C Penney yesterday reported a deeper-than-expected drop in quarterly sales, leading to a big loss, in the department store chain's second straight quarter of severe sales declines since changing its pricing strategy.
Sales at stores open at least a year, or same-store sales, fell 21.7 per cent, steeper than the 17.4pc drop analysts expected, according to Thomson Reuters.
Total revenues tumbled 22.6pc to $3.02 billion during the second quarter, also below Wall Street's low expectations.
In February, Penney largely eliminated the use of coupons and discounts in favour of a strategy of everyday low prices. The move cost the 102-year-old retailer many shoppers and led to an 18.9pc drop in same-store sales in the first quarter.
Last week, Penney debuted the first of its boutiques within a store, the other piece of its transformation that will eventually see each store carved into a collection of 100 spaces for brands such as Levi's, Jonathan Adler, and Betsey Johnson.
Chief executive Ron Johnson, the man who built up Apple's retail chain and the architect of Penney's turnaround strategy, vowed to stay the course.
"While business continues to be softer than anticipated, we are confident the transformation of JCPenney is on track," Johnson said, adding that Penney is positioned to grow again in 2013.
Weaning shoppers off discounts will take time, he said.
But faced with a mutiny by customers long trained to look for sales and use coupons, Johnson has backtracked a bit in recent weeks, making concessions like using the word "clearance" to denote items on sale and simplifying pricing to two levels rather than three.
Many experts say Johnson needs to make more concessions on his pricing ahead of the crucial holiday season, as Penney faces pressure from Macy's and Kohl's Corporation, among others, which still use sales and discounts.
Penney customers are typically more price-sensitive than those of Macy's.
"I am very sceptical as to whether he understands that the J C Penney customer is looking for value and perceives value only with couponing," said Walter Loeb, president of Loeb Associates, management consultants to the retail industry.
"As long as Macy's keeps banging away, I don't think he has a ghost of chance."
On Wednesday Macy's reported second-quarter same-store sales were up 3pc.
Johnson said early response to Penney's simplified pricing and its first shop were "encouraging."