Mixed bag for Penney: Sales fall, but profit tops forecasts

J.C. Penney continued a pattern set by Macy’s, Kohl’s and Nordstrom and reported dismal first quarter sales as traffic declined.



Penney’s sales for the quarter fell to 1.6% to $2.81 billion, below analysts’ forecasts of $2.92 billion, from $2.86 billion in the year-ago quarter, as traffic declined and cool weather dampened demand for apparel. Same-store sales slipped 0.4%.



But while the chain’s sales were worse than expected, it was able to limit the damage to its bottom line, helped by cost controls and improvements in the company’s clearance selling margin. The New York Post reported on May 5th that Penney had taken “drastic cost-cutting steps” in an attempt to protect its bottom line,” including banning markdowns and reducing employees hours.



Penney’s loss for the quarter narrowed to $68 million, or 22 cents a share, down from $150 million, or 49 cents a share, in the year ago period. On an adjusted basis, the loss was 32 cents. Analysts had expected an adjusted loss of 38 cents a share.



“Although our business was not immune to the issues facing other retailers, I am pleased that we were able to deliver our second consecutive quarter of positive operating profit,” said CEO Marvin R. Ellison. “ In addition, the teams did an excellent job of proactively managing the business throughout the quarter to ensure we remained a fiscally disciplined organization. As a result, we exceeded our profitability expectations, achieving a 63 % increase in EBITDA to $176 million for the quarter."



The company`s top performing divisions for the quarter were Men`s, Sephora, footwear and handbags were Geographically, the North East and Ohio Valley were the best performing regions of the country.





Penney also reiterated its full-year earnings guidance, but lowered its profit margin outlook. It also backed its same stores sales guidance for growth of 3% to 4% this year, citing, among other things, the ongoing strong performance of its Sephora business and upcoming rollout of appliance showrooms in nearly 500 of its stores.



“One quarter wasn’t enough to pull down the whole year, “ Ellison said on the company’s earnings call. “With new initiatives kicking in we have tangle things we feel great about that will give us incremental sales growth in the second half of the year.”