J.C. Penney Continues Improvement

J.C. Penney Co.'s results continued to improve in the second quarter, as the retailer reported a narrower loss and better-than-expected sales growth on strength in its Sephora division.

Shares gained 5.3% to $8.50 a share in premarket trading.

The progress in recent quarters has pulled Penney well away from the brink of financial collapse. But it still hasn't climbed out of the hole 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. Chief Executive Marvin Ullman has reversed many of those changes.

For the quarter ended Aug. 1, sales at existing stores rose 4.1%, topping the 3.9% increase analysts had forecast, according to Consensus Metrix.

Penney said growth was driven by its Sephora division, which logged a double-digit increase in same-store sales. The men's, home and fine jewelry division also preformed well in the quarter.

Overall, Penney's loss narrowed to $138 million, or 45 cents a share, from $172 million, or 56 cents a share, a year earlier. Analysts polled by Thomson Reuters had expected a loss of 48 cents a share.

Sales rose 2.7% to $2.88 billion, better than analysts' forecast of $2.86 billion.

Gross margin widened to 37% from 36% a year earlier, helped by improvements in clearance and promotions.

For the year, Penney now expects earnings before interest, taxes, depreciation and amortization of $620 million, compared with its previous expectation of $600 million. It expects selling, general and administrative expenses to fall by $120 million, a $20 million improvement from its previous forecast.

The company backed its other guidance for the year.

The results come amid a string of soft second-quarter reports from retailers like Macy's Inc. and Kohl's Corp. this week. Macy's cut its forecast for sales growth this year to zero after declines in quarterly revenue and earnings, intensifying pressure on the retailer to find new ways to grow beyond its core department store business. Kohl's, meanwhile, attributed its weak sales to the shift in tax-free back-to-school sales in some states from July into August, falling outside of the quarter.

Write to Chelsey Dulaney at [e-mail]

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