Earnings of JC Penney and Kohl's Slide

The J. C. Penney Company and the Kohl’s Corporation have had to bear the brunt of the mounting economic pressure faced by their customers. These U.S. retailers reported a drop in third-quarter profits. To make matters worse, both retailers offered a drab outlook for the holiday quarter.

Penney reported a 9 percent fall in the third-quarter profit, while Kohl’s said that its profit dropped 14 percent. Kohl’s and Penney reported a drop of 2.6 percent and 3.5 percent respectively in same-store sales, or sales at stores open at least a year.

JCPenney was founded in 1902 by James Cash Penney and William Henry McManus. Popularly known as Penneys, it is a mid-range chain of American department stores based in Plano, Texas, a suburb of Dallas. The company operates 1,064 stores in 49 U.S. states and Puerto Rico and is the largest general merchandise catalog business in the United States.

Mike Ullman, chief executive of JC Penney s attributed the fall to the warm weather and downturn in the economy. He observed, "For the first time we really saw a change in consumer sentiment. The combination of weak housing conditions, mortgage and credit market concerns, and rising fuel prices has clearly led to a challenging macroeconomic environment for consumers."

Kohl's Corporation is a Fortune 500 company headquartered in Menomonee Falls, Wisconsin, a suburb of Milwaukee. This American departmental store operates 834 stores in 46 states and is the 23rd-largest retailer in the United States.

In the third quarter, Penney’s earnings fell to $261 million from $287 million a year earlier. Penney was however able to beat Wall Street’s profit. Its net income was $1.03 a share. Kohl’s reported an earning of $194 million in the third quarter vis-à-vis $224.5 million last year.

Both retailers are anticipating a tough last quarter. The tough environment may well run into 2008 wherein the companies may have to cut prices which will in turn put pressure on margins. Mr Ullman said , "2008 is going to continue to be a very difficult selling environment. We are not going to be very aggressive in terms of spending on discretionary projects in this environment."

Kohl’s shares closed down 0.9 percent, to $48.92. Penney’s were down 5.1 percent, at $44.33.