Plano, TX—Some good news—and some bad news—in JCPenney’s third quarter results released today. The struggling department store reports that its loss was wider than expected. Nonetheless, CEO Myron “Mike” Ullman predicted that the store had turned a corner and sales will be much improved in fourth quarter.
For the quarter ended Nov. 2, JCPenney posted a net loss of $489 million, or $1.94 a share, versus a loss of $123 million, or 56 cents a share, in the same period 2012. Excluding one-time items such as impacts of a negative tax-valuation allowance, Penney lost $1.81 a share. Analysts had expected a lesser of $1.77 a share.
Total sales fell 5.1% to $2.79 billion from $2.93 billion last year. Comparable store sales were down 4.8% compared with a 26.1% drop in the year-ago quarter. Online sales, however, continued to improve: up 24.5% to $266 million.
Women’s and men’s apparel and fine jewelry were the top performing merchandise divisions, JCPenney reported.
Gross profit dropped 14% to $819 million while gross profit margin narrowed to 29.5% from 39.5% a year ago due to lower clearance margins and promotions to clear merchandise brought in under ousted CEO Ron Johnson.
Traffic, Conversion Rates Rebound
J. C. Penney’s adjusted operating loss significantly widened during the quarter and came in at $354 million compared with an adjusted loss of $277 million in the year-ago quarter.
Speaking to analysts on a conference call, Ullman noted that traffic, which had been down compared with third quarter last year, rebounded in November and conversion rates for shoppers also have increased.
“Our strategies to reconnect with customers are beginning to take hold, and this became increasingly clear as the quarter progressed,” said Ullman, who returned as chief executive seven months ago. “This is the result of the tremendous efforts of the associates across our company to restore the merchandise customers want and deliver an unmatched shopping experience.”
JCPenney now forecast that gross margin and comp store sales will improve in fourth quarter. Ullman noted again that in October comp sales were up 0.9%, the first monthly gain since December 2011.
Another position forecast—one that may mitigate rumors of an impending bankruptcy—JCPenney reiterated that it will have $2 billion in cash at the end of the year. During the quarter, the company also voluntarily paid down $200 million of its revolving credit balance to $650 million.