JCPenney comps up 6.4% amid legal settlement

JCPenney says the company's third quarter results will "exceed expectations" despite a $50 million settlement charge to settle a false advertising class action lawsuit.

 

The company announced Wednesday that it has reached an agreement to settle a false advertising class action lawsuit brought on behalf of California customers who purchased certain JCPenney private or exclusive branded products.

 

 

Under the terms of the proposed settlement, JCPenney will make available $50 million to settle class members' claims. Class members will have the option of selecting a cash payment or store credit. The amount of the payment or credit will depend on the total amount purchased by each class member during the class period.

 

 

"While we are confident of our position, resolving this litigation removes any uncertainty and risk, which we believe is in the best interest of our shareholders. Despite the financial impact of the settlement, the majority of which was accrued prior to the third quarter, we are pleased with our third quarter results, including a comparable store sales increase of 6.4% and gross margin and earnings performance that exceeded our expectations," said Marvin Ellison, CEO for JCPenney.

 

 

The lawsuit, filed in 2012, arises from the price comparison advertising of private and exclusive branded products JCPenney used in California between November 2010 and January 2012. Plaintiff claims, among other things, that JCPenney's practices did not comply with California law. JCPenney denies the allegations and is entering into this settlement to eliminate the uncertainties, burden and expense of further protracted litigation, the company said.

 

 

The settlement agreement also contemplates that JCPenney will implement and/or continue certain improvements to its price comparison advertising policies and practices, including periodic monitoring and training programs designed to ensure compliance with California's advertising laws.

 

 

The company will release its third quarter 2015 financial results on Friday.