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After showing optimism last month over its further earnings, department store operator J.C. Penney Inc. (NYSE: JCP) turned this morning to the pessimistic side and warned it expects first-quarter earnings below its previous predictions due to weak consumer demand.The company now expects earnings of about 50 cents per share in the first-quarter, down from its prior forecast for profit in a range of 75 cents and 80 cents per share. This is well below analysts' expectations of earnings of 75 cents per share in the quarter, according to Thomson Financial.
J.C. Penney blamed challenging market conditions that put a curb on consumer spending. The slumping U.S. housing market, credit crisis and soaring oil prices put pressure on consumer confidence, resulting in low revenue numbers. During the Easter holiday, the retailer counted lower-than-expected sales.
Looking ahead, the retailer expects to see the "difficult environment" continuing throughout 2008. From this point of view, J.C. Penney is thinking about a management strategy to slash costs "to best position the company to benefit when a recovery takes hold."
The company's warning came as a sign of another negative effect of the current economic uncertainty. On worries over further declines in consumer spending, Wall Street has reacted by pushing the stock down 9.42% to $37.20 in early trading.
Eliza Popescu is a financial writer for the online investment advisory service Investor's Observer.
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