JCPenney: “Significant Strides” Made in Turnaround Efforts

JCPenney storefrontPlano, TX—Seeking to stave off the effects of recent reports about its business, JCPenney today issued an update noting its comparable store sales in September fell only 4% compared to the same month a year ago.

“This constitutes a 580 basis point improvement over August 2013,” the struggling department store said in a statement. “Sales on jcp.com continue to trend double digits ahead of last year, and are up 18.6% in the third quarter to date. September sales on jcp.com experienced 25.3% sales growth over the same period last year.

By category, women’s and men’s apparel, fine jewelry and women’s accessories were performing better than average, the company said. Women’s apparel, JCPenney’s largest business, also had positive sales in September.

“Over the last six months, we have made significant strides and are now seeing positive signs in many important areas of the business, in spite of what continues to be a difficult environment for consumers and retailers in general,” stated CEO Myron “Mike” Ullman.

Nonetheless, gross margin continues “to be impacted by lower clearance margins due to the overhang of inventory from the first two quarters of the year, higher levels of clearance units sold during the period, as well as the company’s transition back to a promotional pricing strategy during the second quarter of 2013.”

In September, units per transaction and average transaction value are above last year, while average unit retail was below last year.

‘Rebuilding Base of Highly Satisfied, Loyal Customers’

Ullman said the company made progress in winning back its customer base, many of whom stopped shopping there last year when former CEO Ron Johnson ceased coupon discounts, closed out private label stock and moved many categories more upscale.

“JCPenney is rebuilding its base of highly satisfied and loyal customers,” Ullman said.

During September, “purchase conversion increased when compared to the same period last year for both stores and jcp.com, primarily due to improved inventory levels in key items and sizes that the customer expects to find at JCPenney.”

For instance, private brands such as “St. John’s Bay, Arizona and Stafford, and key item basics have been restored to inventory levels sufficient” to meet customer demand in the fourth quarter.

“In addition to our private brands, our assortment of trusted national brands such as Levi’s, Carters, Nike and others has made JCPenney a leading destination for families,” Ullman said. “I am pleased that JCPenney’s performance in many key national brands is significantly ahead of last year. JCPenney remains current in its payments to vendors and we are grateful for the strong support and confidence they have shown as we continue to make progress in our turnaround.”

JCPenney also addressed its financial situation, which became the subject of much speculation after the company announced it would be offering 84 million share of common stock in a public offering to raise about $785 million in net cash.

Addressing rumors that it was burning through cash too quickly, JCPenney reiterated that it would end the year with more than $2 billion in cash, after taking into account proceeds of $785 million from a recent stock sale.

“Although there remains significant work to be done, the experience, talent and drive of our team is allowing us to confront our challenges head on and take swift and effective actions to address them,” Ulllman said. “We are all dedicated to continuing the momentum underway and restoring JCPenney to a leadership position in American retail. It will take time, but we are on the right path with a sound strategy and achievable goals.”

JCPenney’s update sent shares of its stock up 4% in early trading after shares closed 69% down this year at $7.71 a share on Monday.

 

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Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology. jeffp@busjour.com