JCPenney recently hailed the return of its private label brand, St. John's Bay, which Ron Johnson had eliminated.

JCPenney Q1 Loss More Than Doubles

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JCPenney recently hailed the return of its private label brand, St. John's Bay, which Ron Johnson had eliminated.

JCPenney recently hailed the return of its private label brand, St. John’s Bay, which Ron Johnson had eliminated.

Plano, TX—”We recognize the magnitude of the challenges that we face, and we believe we can put JCPenney back on a pathway to profitable growth.” So says Myron “Mike” Ullman, the former chief executive to return to the helm at the department store following the ouster of Ron Johnson, the former Apple retail executive whose failed policies guided the retailer into another quarterly loss.

For the quarter ended May 4, JCPenney posted a loss of $348 million, or $1.58 a share, compared to a loss of $163 million, or 75 cents a share, a year ago. Excluding restructuring and management transition costs, the loss was $1.31 a share—far exceeding the 89 cents a share loss analysts’ had predicted.

Not that the sales drop was any surprise. JCPenney last week released preliminary first quarter sales figures so that Goldman Sachs Group could use the information to arrange a $1.75 billion loan. Sales plunged 16.4% to $2.635 billion. Comparable store sales were down 16.6%. JCPenney said last week that first-quarter sales declined because of disruptions from renovations and previous pricing strategies.

The retailer’s gross margin narrowed to 30.8% from 37.6% in the same period a year ago, hurt by lower-than-expected sales and a higher level of clearance sales. JCPenney’s gross margin sank to 31.3% last year, the smallest in a decade.

Ullman has begun to try to turnaround much of what Johnson had put into place. He has been increasing promotions to spur sales and lure back customers as well as raising cash by borrowing $850 million from the $850 million from the company’s credit line while pursuing a $1.75 billion loan. J.C. Penney said last week that first-quarter sales declined 16 percent to $2.64 billion, trailing analysts’ estimates, because of disruptions from renovations and previous pricing strategies.

‘Senior Leadership in Place’

Ullman also pledged to reemphasize the company’s private brands and improve the performance of its online store.

“Over the last year, jcp.com functioned as a completely separate entity inside the company, with little synergy between stores and online,” he said. In the last five weeks, he as taken steps to stabilize the business, “including improving our balance sheet and ensuring we have senior leadership in place,” Ullman said. “With that accomplished, together our team is focused on developing and executing strategies to enable us to reconnect with our customer and improve traffic and sales, while operating with strong financial discipline.”

JCPenney had reported it had $821 million in cash at the end of the quarter, down from $930 million at the end of the fourth quarter.

The loan arranged by Goldman is expected to close on May 22, according to a public filing. That is dependent on JCPenney extinguishing $254 million of its 7.125% bonds due in 2023 because the added debt would break a covenant.

In other news, all 11 board of directors, several of whom were major supporters of Ron Johnson, were re-elected to the board with Ullman replacing Johnson. Still, on the board are William Ackman, whose Pershing Square Capital Management is the largest shareholder and Steven Roth, chairman of Vornado Realty Trust as well as Thomas Engibous, chairman.

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