Penney says profit will fall far short of forecasts

PLANO, TEXAS — J.C. Penney Co., whose stores help anchor hundreds of malls across the country, delivered fresh evidence Friday that the economy is faltering in the face of higher gasoline prices and lower consumer confidence.

The department store chain warned that first-quarter profit would be one-third lower than Wall Street expected, sending its shares tumbling nearly 14% at one point. The stock of other retailers dropped as well.

Chief Executive Myron Ullman said higher energy costs, a drop in hiring and weak housing and credit markets were weighing consumers down.

“Consumer confidence is at a multiyear low,” Ullman said. Though tax refunds might help for a while, he said, “we expect the continuation of a difficult environment over the course of 2008.”

The company said it now expected first-quarter net income of about 50 cents a share, down from its earlier forecast for a profit of 75 cents to 80 cents a share.

Analysts had been expecting 75 cents a share, according to a survey by Thomson Financial.

Sales at stores open at least a year -- a key measurement in retailing -- are expected to fall at least 10% in March and by a “high-single digit” percentage for the entire quarter, which ends May 3.

Penney didn’t say what parts of its business were suffering most, and officials declined to elaborate on the company’s statement. But analysts said they believed categories such as women’s and juniors’ clothing and linens were selling more slowly.

Penney’s announcement raised new concern about the prospect of a recession because consumer spending accounts for about 70% of the U.S. economy.

“Consumer spending is typically glacial and slow-moving, but this time a big chunk came off,” said Richard Hastings, a retail analyst and economic advisor to the Federation of Credit and Financial Professionals.

Shares of Penney fell $3.04, or 7.5%, to $37.48 after dropping 13.6% earlier in the day.

Stock in other retailers also fell.

Shares of Kohl’s Corp. were off $2.19, or 4.9%, to $42.33; Macy’s Inc. shares lost $1.39, or 6%, to $21.97; Sears Holding Corp. shares dropped $3.28, or 3.1%, to $102.20; and Target Corp. shares lost $1.29, or 2.5%, at $49.69.