(Reuters) – J. C. Penney Co Inc on Thursday reported quarterly results that topped estimates as the struggling retailer sold more jewelry and women’s, men’s and children’s apparel during the key holiday shopping season.
FILE PHOTO: A shopper leaves the J.C. Penney department store in North Riverside, Illinois, U.S., November 17, 2017. REUTERS/Kamil Krzaczynski/File Photo
Its shares surged 25 percent in early trade.
The 116-year-old company, once a storied American retailer whose stock is today worth less than one-tenth of its value two years ago, has been trying to strengthen its apparel business and exit products like major appliances to compete with online retailers like Amazon.com Inc and off-price retailers like TJX Cos Inc.
Adjusted sales at J.C. Penney outlets open for at least 12 months fell 4 percent in the fourth quarter ended Feb. 2, better than the average analyst estimate of a 4.3 percent decline, according to IBES data from Refinitiv.
Total net sales decreased 9.5 percent to $3.67 billion, compared with $4.05 billion the year before.
Net income totaled $75 million, or 24 cents per share, compared with $242 million, or 77 cents a share, in the same period last year. Excluding one-time items, the company earned 18 cents per share, 8 cents more than Wall Street expectations.
Plano, Texas-based Penney hopes to turn the company around in part by bringing back lost customers with more popular offerings and improving inventory management.
“In spite of our past financial performance, we have already taken meaningful steps to drive improvement in key businesses such as women’s apparel, active apparel, special-sized apparel and fine jewelry,” Chief Executive Officer Jill Soltau said in a statement.
Analysts were unsure whether it could turn around the business.
“I am a bit skeptical about the chain’s focus on apparel,” said research firm Retail Metrics founder Ken Perkins. “They are doing it because it’s a high-margin category but it remains a highly competitive space that will prove very difficult for Penney to differentiate itself from its competitors.”
The company has shut hundreds of stores over the years and revamped its locations to boost sales and revive profits as it struggles to avoid the same problems that sent longtime rival Sears Hold Corp into bankruptcy.
Penney’s interest coverage ratio – which measures its ability to pay interest on nearly $4.5 billion of debt from operating income – has been negative in all but one of the past seven years.
Both its stock and its bond prices have swooned. Penney shares have collapsed 70 percent in the last 12 months and briefly sank below $1 a share late last year. The stock rose 25 percent, or 31 cents, to $1.55 on Thursday.
(Graphic: J.C. Penney size shrinking – tmsnrt.rs/2VsAvIU)
The company said on Thursday it will shut 18 full-line stores this year and nine ancillary home and furniture stores. It operates 860 department stores across the United States and Puerto Rico.
“We know we need to move faster to re-establish the fundamentals of retail, build capabilities focused on satisfying our customers’ wants and needs,” Soltau said.
Penney said earlier this week it will end a clothing subscription service on Friday to focus on more profitable apparel sales.
The company also announced it has hired Michelle Wlazlo, who has 30 years of merchandising experience at Gap Inc and most recently Target Corp, as its new chief merchant. Penney will also bring in new heads of planning and allocation as well as asset protection.
Reporting by Nivedita Balu and Aishwarya Venugopal in Bengaluru and Melissa Fares in New York; Editing by Sai Sachin Ravikumar and Jeffrey Benkoe