J C Penney Company Inc (NYSE: JCP) finally gave investors something to celebrate on Friday when the company reported a surprise uptick in same-store sales in the third quarter.
While the brick-and-mortar retailer is still hemorrhaging cash, its strategy of clearing old inventory ahead of the holiday shopping season may have steadied the ship for now.
J.C. Penney reported a third-quarter earnings-per-share loss of 33 cents on revenue of $2.81 billion. Analysts had been expecting a 43 cent per-share loss and only $2.77 billion in revenue.
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But the biggest reason why JCP stock traded higher by nearly 15 percent on Friday morning is a surprise 1.7 percent increase in same-store sales, much better than consensus forecasts of only 0.5 percent growth.
“During the third quarter, we took aggressive actions to clear slow-moving inventory, primarily allowing for an improved apparel assortment heading in to the holiday season,” CEO Marvin Ellison said in a statement.
Ellison also said J.C. Penney will be focusing less on apparel and more on higher-end products such as appliances. Its turnaround efforts have included closing more than 140 store stores in 2017.
While investors always appreciate a 15 percent one-day gain, J.C. Penney shareholders’ excitement is certainly tempered given the company’s overall situation. JCP stock plummeted more than 17 percent just two weeks ago to its lowest level in 30 years after the company issued deep cuts to its full-year guidance. J.C. Penney now expects full-year same-store sales growth to be flat at best.
But in an increasingly difficult brick-and-mortar retail environment, even treading water is an achievement. Rival Macy’s ( M) reported a third-quarter same-store sales decline of 3.6 percent, and Sears Holdings Corp. ( SHLD) reported a double-digit same-store sales drop in its most recent quarter.
J.C. Penney’s third quarter may have been better than many had feared, but the company and its investors are not out of the woods yet. Following the company’s guidance cut, BMO Capital Markets analyst Wayne Hood said J.C. Penney still has multiple headwinds to overcome.
“Today’s announcement gives us less confidence in our estimates and … we remain sidelined as we see risk around whether or not this material transformation could indeed back a turnaround within core women’s apparel,” Hood wrote, according to Barron’s.
[See: 8 Luxury Retail Stocks Worth a Look.]
BMO Capital has a “market perform” rating and a $2.75 price target for JCP stock.
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J C Penney Company Inc (JCP) Clears a Low Earnings Bar originally appeared on usnews.com
