Photographer: Victor J. Blue/Bloomberg

J.C. Penney Emerges as Star of Moribund Department-Store Industry

  • Retailer provides rosy forecasts for current fiscal year
  • Chain's resurgence comes as competitors hit rough patch

J.C. Penney Co. surged after posting fourth-quarter profit that topped estimates and forecasting an even rosier 2016, drawing a stark contrast with the lackluster results of its rivals.

Earnings were 39 cents a share in the period through Jan. 30, excluding some items, the Plano, Texas-based company said in a statement Thursday. Analysts projected 21 cents. The retailer also said earnings before interest, taxes, depreciation and amortization will rise to $1 billion this year, which would be the highest in five years.

J.C. Penney has transformed into the standout among its department-store peers just a couple of years after Ron Johnson’s failed transformation left it in tatters. Mike Ullman returned as chief executive officer and tossed much of Johnson’s strategy while stabilizing the chain’s finances through loans and stock offerings. He has been succeeded by Marvin Ellison, a former Home Depot Inc.executive who’s working to improve customer service, sell more private brands and revamp online operations.

“The company seems to be making some improvements to its business, which, when combined with easier comparisons, is likely to generate reasonably good results in the near term,” Paul Lejuez, an analyst for Citigroup Inc., said in a note after the results.

Stock Surges

The shares rose 15 percent to $9.59 on Friday in New York, the biggest advance since January 2015. The stock already had gained 26 percent this year through Thursday.

The results were slated to be published Friday, but they appeared on J.C. Penney’s website on Thursday evening. The company said there was a “technical issue.”

J.C. Penney’s forecast for the current year includes increasing same-store sales 3 percent to 4 percent. Meanwhile, competitor Macy’s Inc. projected a drop of 1 percent.

On an adjusted basis, earnings per share should be positive, J.C. Penney said. Analysts had been estimating a 25-cent-a-share loss, though it’s unclear if that number directly compares.

Outperforming Rivals

J.C. Penney’s same-store sales -- a key metric for retailers -- rose 4.1 percent last quarter. Macy’s posted a 4.8 percent decline on that basis, and Sears Holdings Corp. reported a 7.1 percent drop.

Even with the growth, J.C. Penney is still recovering from the crisis created by Johnson. The retailer’s annual revenue remains about $5 billion less than it was before Johnson arrived in late 2011. In the fourth quarter, sales rose to $4 billion, surpassing estimates of $3.98 billion.

Johnson’s changes included cutting back on promotions and discounts, which turned off longtime customers. The company is trying reinforce its value offering to customers. This week it said it would sell items for 1 cent in a campaign dubbed “Get Your Penney’s Worth.”

To maintain revenue gains, the company will open 60 Sephora boutiques within its stores this year -- double the amount from 2015. It will also expand its relationship with media personality and NFL Hall of Famer Michael Strahan. His line of suits will be expanded to more stores and an “athleisure” brand bearing his name will debut by Father’s Day.

“While we are pleased with our results in the fourth quarter and 2015, we are far from satisfied,” Ellison said on a call with analysts.

(A previous version of the story was corrected to fix analysts’ estimates for the current year’s results.)

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