Penney Loss Narrows Despite Drop In Sales

(RTTNews) - J.C. Penney Co Inc (JCP) on Wednesday reported a smaller loss for the third-quarter, despite a marginal drop in sales, helped by improved gross margins, lower restructuring charges and one-time gains. Loss for the quarter was lesser than what Wall Street estimated, while sales fell short of expectations, reflecting the struggles it faces to boost sales.

Penney shares fell more than 3 percent in after-hours trade on the New York Stock Exchange.

What put off investors was the flat comparable store sales Penney reported for the quarter, although it was somewhat expected. In October, Penney slashed the guidance for this metric in the low-single digit range, citing weak sales in September due to lower levels of clearance and tough retail environment.

Penney has been restructuring itself under CEO Mike Ullman. The department store chain has rebuilt and reestablished the right merchandise assortment, including private and national brands, and has been ramping up its online presence. But challenges are stiff as retailers resort to increased promotions to attract customers, a trend that typically is accentuated during the holiday quarter.

Penney, based in Plano, Texas, posted quarterly net loss of $188 million or $0.62 per share, compared with a loss of $489 million or $1.94 per share last year.

Excluding one-time charges and gains, adjusted loss for the quarter was $0.77 per share, compared with a loss of $1.81 per share a year ago.

On average, 16 analysts polled by Thomson Reuters estimated a loss of $0.80 per share for the quarter. Analysts' estimates typically exclude special items.

Results were helped by gross margin that improved 710 basis points from a year ago, led by better product mix and margin on clearance sales. Also operating expenses were lower by 12.5 percent from a year ago.

Revenues for the third quarter were lower at $2.76 billion, compared with $2.78 billion in the prior year. Twenty-two analysts had a consensus revenue estimate of $2.81 billion for the quarter.

Home and Fine Jewelry were among the company's top performing merchandise divisions, and Sephora inside JCPenney also continued its strong performance.

Penney's inventory was down 10.4 percent, compared with last year

For the fourth quarter, Penney expects comparable store sales to increase 2 to 4 percent.

For the full year, the company expects comparable store sales to increase 3.5 to 4.5 percent, while earlier it was forecast to grow in the mid-single digit.

In October, Penney named Marvin Ellison, currently executive vice president of stores at Home Depot Inc (HD), as president, CEO-designee and board member, effective November 1. Ellison will succeed Mike Ullman as CEO of Penney on August 1, 2015, and at that time, Ullman will become executive chairman of the board for one year.

Earlier today, Macy's Inc (M) reported a 23 percent increase in quarterly profit, helped by improved margins that offset a decline in sales. Earnings beat analysts' expectations, while revenues missed their estimates. For 2014, the company lowered its outlook for earnings and comparable-sales growth.

JCP closed Wednesday at $7.76, up $0.56 or 7.78%, on a volume of 35.4 million shares on the NYSE. In after hours, the stock dropped $0.24 or 3.09% at $7.52.