J.C. Penney’s third quarter results were announced Friday.The Associated Press
J.C. Penney Co Inc on Friday reported a smaller-than-expected quarterly loss as it sold more diamond jewellery and denim clothing, results Chief Executive Jill Soltau said showed efforts to revive sales and profits at the department store are taking hold.
Shares of the Plano, Texas-based company were up nearly 7.3 per cent at $1.18.
The 117-year-old retailer, one of the worst-hit by the surge in online shopping in the past decade, has worked hard to attract more shoppers. In August, it partnered with resale clothing company thredUP, adding second-hand women’s clothing and handbags to its merchandising mix.
It is also testing a new store format to win over customers with everything from a yoga studio, a videogame lounge and lifestyle workshops.
Such efforts are a part of Soltau’s turnaround strategy, aimed at reassuring investors it can lure shoppers back into stores amid fierce competition from online giants like Amazon.com Inc and discount retailers like TJX Cos Inc’s Marshalls and T.J. Maxx chains.
“We are beginning to see results – both in our numbers and how we operate as a business,” Soltau said in a statement on Friday.
Rivals, including Macy’s and Nordstrom Inc, are also looking to woo shoppers with cafes, donut shops, fine-dining restaurants and full bars with Instagrammable views.
Soltau, hired late last year from craft and fabrics seller Jo-Ann Stores, is attempting to restore Penney’s roots as a retailer of mid-priced apparel for middle-class families after years of falling sales and strained cash flow.
Earlier this year, Soltau chose to stop selling major appliances and limit furniture offerings and has worked to reduce inventory, lower ad spend and close underperforming outlets.
“We are re-establishing and rebuilding J.C. Penney to be around for the next 117 years,” Soltau said.
Chief Financial Officer Bill Wafford on an earnings call highlighted the success of Penney’s higher-margin fine jewellery category, footwear, and men’s and women’s apparel, with denim including Levi’s selling well.
Even so, analysts said there’s still a lot of work to be done to repair the brand.
“The company still needs to show a path of sustained profitability, comparable store sales momentum and gross margin improvement to gain investor confidence,” said CFRA analyst Camilla Yanushevsky.
As recently as Sept. 2016, Penney’s stock was trading around $10 a share, but hit a record low of 53 cents this year.
Excluding one-time items, Penney reported a loss of 30 cents per share, narrower than the average analyst estimate of a 55-cent loss. Total revenue fell 8.5 per cent to $2.5 billion.
The company said it expects adjusted earnings before interest, tax, depreciation and amortization for the year to exceed $475 million, above its prior outlook of $440 million to $475 million.
It maintained its full-year forecast for comparable store sales.
Sales at stores open for more than a year fell 9.3 per cent, compared with expectations of a 7.74 per cent slide, according to data from IBES Refinitiv.
.S. retail sales rebounded in October, but consumers cut back on purchases of big-ticket household items and clothing, which could temper expectations for a strong holiday shopping season.
The report from the Commerce Department on Friday pointed to a moderation in consumer spending, but probably not enough to knock the economy off its moderate growth path.
“Consumers are easing off their spendthrift ways from the second quarter and are adopting more prudent attitudes, perhaps still nervous over trade tensions and the slowing of hiring -though that still remains robust,” said Robert Frick, corporate economist at Navy Federal Credit Union in Vienna, Virginia.
“Should these trends continue we will be facing a not-so-merry holiday shopping season.”
Retail sales increased 0.3 per cent last month, lifted by motor vehicle purchases and higher gasoline prices, reversing September’s unrevised 0.3 per cent drop, which was the first decline in seven months. Economists polled by Reuters had forecast retail sales gaining 0.2 per cent in October.
Compared to October last year, retail sales advanced 3.1 per cent.
Excluding automobiles, gasoline, building materials and food services, retail sales increased 0.3 per cent last month. Data for September was revised lower to show the so-called core retail sales slipping 0.1 per cent instead of being unchanged as previously reported. Core retail sales correspond most closely with the consumer spending component of gross domestic product.
The dollar briefly dipped on the data against a basket of currencies before rebounding. U.S. Treasury prices rose. U.S. stock index futures were little changed.
SOLID CONSUMER SPENDING
Consumer spending, which accounts for more than two-thirds of the economy, increased at a 2.9 per cent annualized rate in the third quarter. It is being supported by the lowest unemployment rate in nearly 50 years and has helped to blunt the hit on the economy from the White House’s 16-month trade war with China.
The U.S.-China trade war has led to a decline in capital expenditure and a recession in manufacturing.
The rebound in core retail sales added to reports showing stabilizing inflation in supporting the Federal Reserve’s signal that it will probably not cut interest rates again in the near term. Other reports this month have shown solid job growth in October and an acceleration in services sector activity.
The data and easing trade tensions between Washington and Beijing have diminished financial market fears of a recession. Fed Chairman Jerome Powell told lawmakers on Thursday that “the U.S. economy is the star economy these days,” compared to other advanced economies and “there’s no reason that can’t continue.”
The Fed last month cut rates for the third time this year and signaled a pause in the easing cycle that started in July when it reduced borrowing costs for the first time since 2008.
Auto sales increased 0.5 per cent in October after declining 1.3 per cent in September. Receipts at service stations surged 1.1 per cent, reflecting higher gasoline prices, after dipping 0.1 per cent in the prior month. Online and mail-order retail sales increased 0.9 per cent after gaining 0.2 per cent in September.
Walmart Inc on Thursday reported better-than-expected earnings for the third quarter, driven by food sales. The world’s largest retailer raised its annual outlook.
But the retrenchment in purchases of big-ticket household items casts a cloud on the holiday shopping season, which typically kicks off around Thanksgiving.
Sales at electronics and appliance stores fell 0.4 per cent last month and receipts at clothing stores declined 1.0 per cent. Spending at furniture stores fell 0.9 per cent, the largest decline since December 2018. Receipts at building material stores dropped 0.5 per cent.
Purchases of these items were likely hurt by the broadening in October of tariffs on imported Chinese goods to include a range of consumer goods.
Americans also cut back on spending at restaurants and bars, with sales falling 0.3 per cent, the most in nearly a year. Spending at hobby, musical instrument and book stores dropped 0.8 per cent.
A separate report on Friday from Labor Department showed import prices fell more than expected in October, pulled down by declines in the prices of petroleum products and food, suggesting inflation could remain moderate despite an increase in overall consumer and producer prices in October.
The Labor Department said on Friday import prices dropped 0.5 per cent last month. Data for September was revised lower to show import prices gaining 0.1 per cent instead of climbing 0.2 per cent as previously reported.
Export prices dipped 0.1 per cent in October after falling 0.2 per cent in the prior month. Export prices decreased 2.2 per cent on a year-on-year basis in October, the most since August 2016, after falling 1.6 per cent in September.