J.C. Penney Sales Rise, But Shares Fall--4th Update
November 13 2015 - 10:15AM
Dow Jones News
By Anne Steele And Suzanne Kapner
J.C. Penney Co. reported better-than-expected sales growth of
4.8%, citing strength in all of its merchandise divisions, and
lifted profit estimates for the year.
Still, shares of Penney fell 8.3% to $8.06 in morning trading as
other mall-based retailers have warned about weak spending by
consumers heading into the holiday season.
Marvin Ellison, Penney's chief executive, said Friday that
despite a difficult macro environment and the unusually warm
weather, the retailer was well-positioned heading into the holiday
season. He added that Penney hasn't noticed any significant
headwinds with its customer base heading into the fourth
quarter.
In contrast, Nordstrom Inc. on Thursday cut its profit and sales
forecasts, saying it didn't expect consumer trends to improve in
the fourth quarter. Macy's Inc., meanwhile, warned Wednesday that
it would have to make heavy markdowns to clear unsold goods after
sales fell short in its most recent period.
Penney said it plans to increase marketing dramatically in the
fourth quarter to help it stand out in what it expects to be a very
competitive environment.
A year-ago, Penney lost out on sales because it didn't have
enough merchandise in its stores. This year, the retailer stocked
up on more goods. which Mr. Ellison said would help it to continue
to take share from rivals.
For the year, the company said it now expects adjusted earnings
before interest, taxes, depreciation and amortization of $645
million, up from its August estimate of $620 million.
As for the third quarter, Penney said all of its merchandise
divisions reported sales growth at established stores from a year
ago. Among the company's top-performing divisions were men's, home,
footwear, handbags and the cosmetics chain Sephora, Penney
said.
Overall, Penney's loss--which reflects the company's
restructuring costs--narrowed to $137 million, or 45 cents a share,
from $188 million, or 62 cents a share, a year earlier. Analysts
polled by Thomson Reuters had expected a loss of 55 cents a
share.
The company said its adjusted earnings before interest, taxes,
depreciation and amortization improved by $83 million in the third
quarter to $108 million.
Sales rose to $2.9 billion from $2.76 billion, better than
analysts' forecast of $2.88 billion. Sales at existing stores rose
6.4%, which the company had reported Wednesday.
Gross margin widened to 37.3% from 36.6% a year earlier, helped
by improvements in clearance and promotions.
The results in the latest quarter suggest continued progress by
Penney in climbing out of the hole that it fell into under former
CEO Ron Johnson. Mr. Johnson, a former Apple Inc. executive,
crushed sales by doing away with discounts and popular house
brands.
Mike Ullman, who handed over the chief executive role to Mr.
Ellison on Aug. 1, reversed many of those changes.
"The continuation of our strong sales performance this quarter
demonstrates ongoing progress towards achieving the company's
long-term financial targets," Mr. Ellison said Friday,
acknowledging that significant work remains to be done.
Write to Anne Steele at Anne.Steele@wsj.com and Suzanne Kapner
at Suzanne.Kapner@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
November 13, 2015 10:00 ET (15:00 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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