J.C. Penney Sales Rise On Broad-Based Strength--2nd Update

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 3.9% to $8.45 in premarket 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 despite a difficult macro environment that included unusually warm weather, the retailer was well-positioned heading into the holiday season.

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.

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 Marvin 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 [e-mail] and Suzanne Kapner at [e-mail]

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(END) Dow Jones Newswires

November 13, 2015 09:13 ET (14:13 GMT)

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