J.C. Penney Co., the department-store chain that hasn’t had an annual profit in three years, posted a narrower second-quarter loss as the retailer’s revival of promotions and discounts brought back shoppers.
The net loss in the three months ended Aug. 2 shrank to $172 million, or 56 cents a share, from $586 million, or $2.66, a year earlier, the Plano, Texas-based retailer said yesterday in a statement. Sales rose 5.1 percent to $2.8 billion. Analysts estimated $2.78 billion, on average.
Since Mike Ullman took back the chief executive officer job from Ron Johnson in April 2013, he’s steadied the retailer by undoing much of his predecessor’s overhaul. That has included bringing back private-label goods, discounts and affordable housewares that Johnson had nixed in a failed bid to woo younger and wealthier shoppers.
“They’ve gone back to their core competency, boosting private label, getting back into the home department,” Mary Ross-Gilbert, a managing director at Imperial Capital LLC in Los Angeles, said yesterday in an interview. “We should see further improvement as they get other categories back to where they need to be.”
The shares fell 2.5 percent to $9.50 at the close in New York. The stock has risen 3.8 percent this year.
Ullman’s strategy of bringing back private-label brands and increasing discounting reversed the sales declines under Johnson. Sales at stores open at least a year rose 6 percent in the quarter. Analysts estimated a 5.8 percent gain. Same-store sales will rise at a mid-single-digit percentage rate for the rest of the year, J.C. Penney said yesterday.
J.C. Penney’s operations haven’t generated cash on an annual basis since the fiscal year ended January 2012. That’s prompted Ullman to raise about $3.9 billion in cash through stock sales and borrowing to shore up the retailer’s liquidity.
Last quarter, J.C. Penney’s operations generated $137 million in cash. Still, the company’s balance of cash and equivalents fell 33 percent to $1.04 billion.
The company said it expects to have positive free cash flow this fiscal year and end the year with about $2.1 billion in liquidity, which includes cash and borrowing capacity under its credit revolver.
Gross margin, or the percentage of sales left after the cost of merchandise, widened to 36 percent from 29.6 percent, the third straight quarterly expansion.