J.C. Penney September Comps Rise Sequentially, Says Year-end Liquidity Strong

(RTTNews) - J.C. Penney Co. Inc. (JCP) Tuesday said it is making solid progress in its turnaround, adding that sales in September showed a sequential increase. The company's online sales witnessed a significant increase from the previous year.

The retailer said it has ample liquidity and that it has restored private brands in anticipation of the Holiday Season. The stock surged more than 5 percent in pre-market activity.

According to the struggling department store chain, comparable store sales for the fiscal month of September, which ended on October 5, slid 4 percent, compared to last year. This is an improvement of 580 basis points from the previous month.

Sales on jcp.com continued to trend double digits ahead of last year, and are up 18.6 percent so far in the third quarter. September sales on jcp.com saw 25.3 percent growth from last year.

Women's and Men's apparel, fine jewelry and Women's accessories are performing better than the company average. Women's apparel, the company's largest business, reported positive sales for September.

However, gross margins continue to be hurt by lower clearance margins due to inventory from the first two quarters and higher levels of clearance units sold during the period. Gross margins were also hurt by the company's transition back to a promotional pricing strategy during the second quarter.

For September, units per transaction and average transaction value increased from last year, while average unit retail was below last year.

Myron Ullman, III, CEO, said, "Over the last six months, we have made significant strides and are now seeing positive signs in many important areas of the business, in spite of what continues to be a difficult environment for consumers and retailers in general.''

Ullman added that the retailer is still in the early stages of the turnaround.

During September, purchase conversion increased for both stores and jcp.com, due mainly to improved inventory levels in key items and sizes. Traffic trends improved during the quarter, including positive off-mall traffic for the last two weeks of September, even as traffic in mall-based stores continues to be difficult.

The company has restored private brands, such as St. John's Bay, Arizona and Stafford, and key item basics to inventory levels to meet customer demand heading into the Holiday season.

The retailer said it is working aggressively to create a more balanced assortment between modern and traditional home furnishings.

Regarding its financial position, JCPenney said after closing last week a public offering of 84 million shares which generated $785 million in net cash proceeds, the company's year-end liquidity is now expected to be in excess of $2 billion.

The company had said last month in a filing with the regulators that it still anticipates a positive comparable store sales trends in the third quarter and throughout the fourth quarter. The company also said it currently expects to end the year with approximately $1.3 billion in overall liquidity, excluding the net proceeds from the latest share offering.

The stock, which closed at $7.71 on Monday, climbed 5.2 percent in pre-market activity.