J.C. Penney Co. Inc. (NYSE: JCP) is scheduled to report fiscal first-quarter earnings on May 13, and by the look of it, the good news from the fourth quarter will not be repeated. According to a news report on Friday, the company was forced to cut back employee work hours last month in an effort to reduce expenses. The report sent the stock down 7.5% for the day.

In the fourth quarter, J.C. Penney posted a profit and same-store sales growth of more than 4%. Just ahead of reporting first-quarter report, the company was so desperate to reduce costs that it cut employee hours in the last half of April to save an average of around $8,000 per store.

According to the report in the New York Post, poor sales in April forced J.C. Penney to take unprecedented cost-cutting steps in order to maintain its bottom line. The company also banned the use of corporate credit cards and forbade more price markdowns during the period. Full-time and part-time employees reportedly had their working hours reduced.

The Post cited an internal memo from J.C. Penney:

We have an expense challenge for the month of April and are asking all stores to do their fair share by closely monitoring all expenses.

An unidentified employee gave the paper a broader view:

Employees expect reduced hours in the slow months of January and February but not in April. When the quarterly figures are released, they do not represent the financial struggles and low morale of the thousand[s] of associates company-wide.

On one hand one might conclude that J.C. Penney workers are lucky to still have a job and stockholders are lucky that their shares are still worth something. On the other hand, actions like this demonstrate just how shaky the house of cards may be.

One week ago, Barron’s ran a story that claimed J.C. Penney stock could double. The stock closed at $9.28 a share on Friday and reached a high of $9.75 on Monday. By Thursday’s close the shares traded at $8.93. It is true that the company is in better shape now than it was a year ago, but one thing to remember about its same-store sales is that they were down so far that any improvement looks like up.

The company has made progress with its balance sheet as well, cutting its long-term debt from $5.2 billion to $4.8 billion in the past year. But that gets harder to do if sales falter.

Shares closed down 7.5% on Friday at $8.26. The stock’s 52-week trading range is $6.00 to $11.99, and the consensus price target is $11.61. The highest target is $20 and the lowest is $5.

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