J.C. Penney sees holiday quarter comparable sales improving
By Phil Wahba
(Reuters) - Struggling retailer J.C. Penney Co Inc (JCP.N: Quote, Profile, Research, Stock Buzz) on Wednesday said it was encouraged by business so far in November and forecast higher comparable store sales in the current holiday quarter.
The company stuck to its forecast for more than $2 billion in liquidity at fiscal year-end, and its shares were up 7.7 percent to $9.38 in premarket trading.
"The turnaround at J.C. Penney is beginning to take hold," Chief Executive Myron Ullman said on a conference call with analysts.
Penney reported a deeper net loss for the fiscal third quarter as heavy promotions aimed at winning back shoppers and clearing out unsold merchandise hurt gross profit margin. But Wall Street was more focused on the company's comments regarding the progress of its turnaround.
"It shows they have right momentum now, but ultimately we're looking at the fourth quarter," said Walter Loeb, retail analyst with Loeb Associates.
Penney last year suffered a 25 percent drop in sales after former CEO Ron Johnson jettisoned the discounts and some merchandise favored by its long-time customers. The sales declines, which continued until September, stirred concern about the retailer's financial health.
To remedy that, Ullman, who took the helm in April, has brought back store brands such as St. John's Bay clothing and has been aggressive in cutting prices. Ullman succeeded Johnson and was also his predecessor.
As previously reported, for October Penney posted its first monthly comparable sales gain in nearly two years, and it said it expects business, and gross profit margin, to continue improving in the fourth quarter, which includes the holiday period.
During the holiday quarter a year ago, comparable sales, which include sales at stores open at least a year and online sales, fell 31.7 percent, making comparisons for the current quarter easier. Gilford Securities has forecast comparable sales could rise as much as 15 percent in the fourth quarter.
The company also said it expects selling, general and administrative expenses to be below last year's levels.
Penney, which earlier this year lined up a $2.25 billion financing package and in September sold nearly $800 million in stock to further shore up its finances, said it had voluntarily paid down $200 million on its revolving credit facility during the third quarter.
The company's debt at the end of the quarter totaled $5.61 billion.
Gross margin, a measure of profitability, fell 3 percentage points to 29.5 percent of sales in the quarter, though Penney said it had improved each month in the quarter.
For the fiscal third quarter, ended November 2, Penney reported a net loss of $489 million, or $1.94 per share, compared with a net loss of $123 million, or 56 cents per share, a year earlier. Excluding items such as restructuring expenses, Penney lost $1.81 per share.
(Reporting by Phil Wahba in New York; Editing by Gerald E. McCormick and John Wallace)