J.C. Penney Jumps After Inventory Overhaul Sparks Sales GainBy
CEO says comparable sales improved in nearly all categories
Company posts loss of 33 cents a share, less than expected
J.C. Penney Co. has managed an elusive feat for the department-store industry: positive same-store sales.
The retailer’s shares rose the most in almost three years after comparable sales -- a key metric -- exceeded expectations in the latest quarter, bucking the negative trend. The measure, known in the industry as comps, was bolstered by J.C. Penney’s decision to liquidate slow-moving merchandise, a move that also sparked a loss for the period.
“We are encouraged that we delivered positive sales comps,” Chief Executive Officer Marvin Ellison said in a statement. Comparable sales improved “in nearly all merchandise categories in the third quarter, giving us confidence that our overall strategy and transformation is beginning to take hold.”
Ellison has been streamlining the retailer’s operations and improving inventory management as he tries to stem a broader slide in sales. J.C. Penney is moving away from quick-moving fashion trends, instead betting on selling services and more expensive items like appliances. The company has also been closing underperforming stores in response to shrinking mall foot traffic.
The results bring another ray of optimism to department stores, which have felt the strain of consumers’ shift to online commerce. Macy’s Inc. also saw shares jump the most in more than a year after reporting its results yesterday, while Nordstrom Inc. fell after trimming its profit guidance and falling short of sales estimates.
J.C. Penney shares rose as much as 20 percent to $3.29 on Friday. The stock had plunged 67 percent this year through Thursday’s close.
Same-store sales rose 1.7 percent in the period ending Oct. 28, higher than the estimate of 0.7 percent from Consensus Metrix. The company’s loss of 33 cents a share -- after excluding some items -- was less than analysts’ expected loss of 40 cents a share.
The company reaffirmed its forecast that same-store sales will decline as much as 1 percent this year, while adjusted earnings are expected to range from 2 cents to 8 cents a share. Appliance sales, an area the company only recently entered, more than doubled from a year earlier.
Last week, J.C. Penney said its chief merchant, John Tighe, will leave the company and his position will be eliminated -- a move meant to simplify corporate structure and improve flexibility. Three senior merchandising officials will now report directly to Ellison, while other executives’ roles will be expanded. Tighe had been promoted to his role of overseeing merchandise in 2015.