J.C. Penney reports progress in turnaround; stock edges higher
J.C. Penney Co.’s depressed stock regained some ground Tuesday after the company said it was “making solid progress in its turnaround.”
In a self-issued report card, the department store chain said it anticipates that it will have more than $2 billion in cash and other liquid assets at the end of the year, helped by a recent public offering of 84 million shares that brought in $785 million.
And although sales at stores open at least a year slipped 4% in September from a year earlier, the Plano, Texas, company said that online sales surged 25.3%. In August, online sales were up 10.8% year over year while sales at stores open at least a year plunged 10%.
J.C. Penney shares closed Tuesday at $7.77, up 6 cents, or nearly 1%, after climbing as high as $8.25 during the day. The stock is down about 60% this year.
Chief Executive Myron Ullman, who took over the company after his predecessor, Ron Johnson, vacated the post in a haze of controversy, said that despite some improvement the retailer was “still in the early stages of the turnaround.”
“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 said in a statement.
J.C. Penney said that women’s apparel — its largest business segment — was producing more revenue than the company average, along with men’s apparel, fine jewelry and women’s accessories.
Revamping the retailer’s home departments “has been more challenging than originally planned,” according to the chain, which has overhauled all but a few of the 505 departments.
The company said customers last month were buying more items per transaction and also spending more than they were a year earlier. And although traffic to its mall-based stores was still weak, visits to stores in other locations were up in the last two weeks of September compared with a year earlier.
Analysts such as Liz Dunn of Macquarie Capital were cheered by the disclosures. She wrote that J.C. Penney’s bullishness on liquidity suggests that earlier efforts to raise capital showed “an abundance of caution” instead of “a move of desperation.”
“While the release by no means suggests the company is back in the black, it does look to us like they are on track with the turnaround and key strategies such as restoring promotional pricing and increasing stock of private brands and basics are beginning to work,” Dunn wrote in a note to clients.
But at Sterne Agee, analyst Charles Grom downgraded the stock to neutral, writing in a note to clients that “recent developments leave us less comfortable sticking our necks out.”
He wrote that recent trips into stores showed new fall merchandise already being heavily discounted, which could have the effect of “potentially impairing margins for an extended period.”