J.C. Penney sales up 6.4% but its stock plunges

  • Associated Press
  • Friday, November 13, 2015 3:45pm
  • Business

PLANO, Texas — J.C. Penny reported stronger-than-expected sales for the third-quarter, but the department store operator’s failure to raise its forecast for the year appeared to add to worries that upcoming holiday shopping season could turn out to be a dud for retailers.

The company’s results follow disappointing sales this week from Macy’s and Nordstrom, which both cut their outlooks for the year citing softer sales trends. Macy’s blamed its sales decline in the third quarter partly on warmer than normal weather, which it said hurt sales of items like coats and boots.

As a result, Macy’s CEO Terry Lundgren also said the company would need to mark down items during the holiday season to get rid of its merchandise by the end of year. It said that would result in lower sales and gross margin in the fourth quarter, compared to a year ago. Shares of Macy’s, Kohl’s and Nordstrom were all down Friday.

J.C. Penney, meanwhile, fared better than its peers in the third quarter, with sales up 6.4 percent at established locations. The company also said its gross margin improved, driven by supply chain productivity and improvements in margins for its sale items.

Yet the company maintained its full-year forecast for sales to climb between 4 and 5 percent. Its shares were down more than 11 percent at $7.79.

The company is also still bleeding money, but is hoping to change that by cutting costs and continuing to push up sales.

A big part of the strategy is focusing more on J.C. Penney’s private brands, which tend to cost the company less to carry on shelves than national name brands. J.C. Penney says private brands, which account for 51 percent of sales, represent a big opportunity for improving margins.

“When you survey our customers, they believe that they are national brands,” said CEO Marvin Ellison, who joined the company a year ago.

Ellison also noted the company is increasingly using Sephora makeup locations within its stores to attract younger customers, and get them to visit more frequently and spend more per visit.

The company, based in Plano, Texas, said its loss narrowed to $137 million, or 45 cents per share, for the period ending Oct. 31. Losses, adjusted for one-time gains and costs, came to 47 cents per share. Analysts had forecast a steeper loss of 58 cents per share, according to Zacks Investment Research.

Revenue rose to $2.9 billion, also exceeding Street forecasts of revenue of $2.86 billion.

Penney shares have risen 36 percent since the beginning of the year.

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