Plano, TX—A narrowed first quarter loss along with a rebound in comparable store sales by JCPenney gave hope that the department store had gained traction in its turnaround. Shares of the company were up again today as a result.
For the quarter ended May 3, the department store lost $247 million on an operating basis—49.2% better than a year ago—recording a net loss of $352 million or $1.15 a share. Analysts expected a loss of $1.25 a share.
‘Revamp Taking Hold’ with Customers
Net sales rose 6.3% to $2.8 billion, ahead of analysts estimate for $2.71 billion in sales. Comparable store sales were up 6.2% better than JCPenney’s own estimate. Going forward, JCPenney plans to revise its comp sales figure excluding certain items such as sales return estimates and liquidation sales.
“Under this new methodology, comparable store sales in the first quarter rose 7.4 %, which includes online sales that grew 25.7 % over the same period last year,” JCPenney said.
By category, top performing areas included women’s and men’s apparel, home, and fine jewelry. Sephora inside JCPenney also continued its strong performance. Geographically, all regions delivered sales gains over the same period last year with the best performance in the western and central regions of the country.
Gross margin also widened to 33.1% compared to 30.8 % in the same quarter last year, while better than last year, gross margin was negatively impacted by an increase in clearance sales as a percentage of total sales in February and March, as well as negative clearance margins,” the company said
Selling, general and administrative expenses were down $69 million to approximately $1.01 billion or 36 % of sales, primarily driven by lower corporate support costs, advertising and improved credit income.
CEO Myron E. “Mike” Ullman, who returned to the helm last year following the disastrous tenure of Ron Johnson, hailed the report.
“We are very pleased to report that JCPenney delivered its second consecutive quarter of comparable store sales growth, as well as continued gross margin improvement,” Ullman said. “It is clear that our efforts to re-merchandise many areas of the store and revamp our messaging to the customer are taking hold. Despite a difficult retail environment, our strong performance during the Easter holiday period and other key promotional events enabled us to deliver better than anticipated sales results. We expect to carry this momentum into the second quarter as we continue to position the company for long-term profitable growth.”
JCPenney also reported it had obtained a new credit facility of $2.35 billion, replacing a $1.85 billion bank line.
The retailer’s forecast also was positive. For the second quarter, JCPenney forecast a comp sales increase in the mid-single digits with gross margin expected to continue to improve as expenses fall from last year. And for the full fiscal year, JCPenney estimates comp store sales to increase in the mid-single digits with gross margin to “improve significantly versus 2013.”