By Suzanne Kapner
J.C. Penney Co. warmed the hearts of investors on Wall Street
late Tuesday, reporting stronger-than-expected sales for the
holiday period.
Its news sent the beleaguered department-store chain's stock
soaring 20% and provided a positive first indicator for how
retailers fared over the year-end shopping bonanza.
Penney said sales rose 3.7% in the nine weeks through the end of
December, excluding newly opened and newly closed stores. That
compares with 3.1% growth for the same period last year. The strong
result led the company to say its fourth-quarter sales growth
should come in at high end of a forecast range of 2% to 4% from a
year ago. Analysts at Retail Metrics had projected growth of 2.7%
for the quarter.
"Our highest priority over the last year has been to restore
profitable sales growth at J.C. Penney," Chief Executive Myron E.
Ullman said. "This holiday season was instrumental in that
effort."
Shares of Penney surged to $7.87 in after-hours trading, after
having risen 1.9% to $6.56 during the regular session, when the
overall market was down. In October, the company had lowered its
sales guidance for the third quarter after sales softened in
September, raising concern among some analysts about Penney's
ability to meet its sales goals for the year.
Penney is the first big retailer to report sales for the holiday
season, and fingers have been crossed that early optimism for the
sector isn't misplaced. The National Retail Federation, an industry
trade group, is forecasting the strongest sales growth since 2011,
with sales in November and December up 4.1%. That would be better
than the past two years but below the 4.8% increase in 2011.
This year, declining joblessness, stronger economic growth and
plunging gas prices have helped fuel optimism that Americans were
willing to spend more on Christmas gifts.
A handful of other retailers, including Gap Inc., L Brands Inc.,
which owns Victoria's Secret, and Costco Wholesale Corp. are
scheduled to release monthly sales figures for December on
Thursday.
For December, same-store sales are expected to rise 3.9% in
aggregate for the handful of retailers that report the figure
monthly, according to Retail Metrics. The gain would have been
stronger except that lower gasoline prices hold down receipts at
Costco's filling stations, Retail Metrics said. (Same-store sales
exclude newly opened or closed stores.)
Retail sales gained momentum each week of December, according to
the International Council of Shopping Centers. And FedEx Corp. and
United Parcel Service Corp. had to cap air-express deliveries in
the final days before Christmas as last-minute shoppers caused some
retailers to exceed agreed-upon limits.
Last year at this time, Penney spooked investors when it said
only that it was "pleased" with its holiday performance and didn't
disclose any specific figures, driving the stock down and raising
concerns about the company's turnaround efforts.
Penney continues to face a host of challenges as it tries to
recover from a failed overhaul that turned off shoppers by doing
away with discounts and popular house brands. Like many retailers,
Penney's bottom line has been hurt by increased markdowns and
promotions in an attempt to attract consumers and clear excess
inventory.
Some analysts have said promotions were less steep this year
than in 2013 when sluggish sales forced retailers to slash prices
more than planned. In addition, many retailers were careful not to
stock too much inventory this year, leaving them in a better
position in January, BMO Capital Markets Corp. analyst John Morris
said in a note to clients.
Maria Armental contributed to this article.
Write to Maria Armental at maria.armental@wsj.com
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