Oct 8, 2013
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JC Penney says September same-store sales show improving trend

Oct 8, 2013

Struggling department store operator J.C. Penney reported a smaller decline in same-store sales for September, compared to August, and said it expected improved sales trends to continue for the remainder of the year.

The company, whose shares rose as much as 5 percent in early trading, has been struggling since a failed attempt last year by a former chief executive to take the chain more up-market.

Sales fell 25 percent in 2012, while the stock has lost about 80 percent of its value since former CEO Ron Johnson implemented the makeover that has since been rolled back.

A Penney spokeswoman said the company had issued the update on its performance because it wanted to give investors a more detailed account of its progress given market speculation surrounding its turnaround.

The company said on Tuesday that while September same-store sales fell 4 percent over the same month last year, they showed an improvement from a 9.8 percent decline in August.

"It's reassuring, at least, that they're limiting the (sales) decline," Atlantic Equities analyst Daniela Nedialkova said, adding that it was in line with her expectations.

Women's and men's apparel, fine jewelry and women's accessories were performing better than average, the company said. Women's apparel, Penney's largest business, also had positive sales in September.

"Over the last six months, we have made significant strides and are now seeing positive signs in many important areas of the business, in spite of what continues to be a difficult environment for consumers and retailers in general," Chief Executive Myron Ullman said in a statement.

The company said inventories of higher-margin private brands such as St. John's Bay and Stafford and its assortment of basic apparel were well-stocked to meet holiday season demand.

Ullman said he was also encouraged by the performance of such national brands as Levi Strauss and Nike, which were significantly ahead of last year.

Levi Strauss Chief Executive Chip Bergh told Reuters last week that sales of Levi's products at Penney had risen by a double-digit percentage last quarter.

Sales at Penney's home goods section continued to struggle as the merchandise assortment, shopping environment and price points did not resonate with customers, the company said.

The retailer said it was working to create a more balanced assortment of modern and traditional home furnishings.

Gross margins were hurt by clearance sales to reduce inventory from the first two quarters of the year, as well as by the company's transition back to a promotional pricing strategy.

Ullman, appointed CEO in April, has largely restored Penney's original strategy, which focuses on deep discounts and coupons.

Penney reiterated that it would end the year with more than $2 billion in cash, after taking into account proceeds of $785 million from a recent stock sale.

Penney shares were up 4 percent at $7.98 in early trading on the New York Stock Exchange.

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