J.C. Penney Key Sales Metric Rises in October

Inside A JC Penney Co. Store Ahead of Earnings Results
Patrick T. Fallon/Bloomberg via Getty Images
By ANNE D'INNOCENZIO
and MICHELLE CHAPMAN


PLANO, Texas -- J.C. Penney said Thursday that a key sales barometer rose in October for the first time in nearly two years, a sign shoppers are slowly returning to the store brands brought back to its shelves.

But the beleaguered company, based in Plano, Texas, warned that its profit margins would be hurt as it had to discount heavily to get rid of an overhang of merchandise from the first half of the year.

Investors were encouraged by the report, driving Penney (JCP) shares up in morning trading. But some analysts are wary, noting the department store chain still has to discount heavily to grab shoppers.

"What they are doing is giving the store away in both new merchandise and clearance," said Brian S. Sozzi, CEO and chief equities strategist at Belus Capital Advisors.

News from Penney came as a handful of other retailers including Costco Wholesale (COST) and Limited Brands (LTD) reported monthly sales gains in October that were better than analysts expected. That showed that a partial government shutdown that lasted 16 days had a limited impact on shoppers' willingness to spend. That's encouraging heading into the crucial holiday shopping season.

Penney said sales at stores open at least a year edged up 0.9 percent last month -- the first increase since December 2011. This figure is a key indicator of a retailer's health, because it measures growth at ongoing locations by excluding results from stores recently opened or closed

In September, the figure fell 4 percent, and in August, the same measure dropped 9.8 percent.

October online sales climbed 37.6 percent from last year, with home merchandise sales rising more than 50 percent from September 2012. There were also strong sales of women's, men's and children's clothing.

J.C. Penney said it continues to work on remerchandising and reconfiguring its home department in stores and online so that it matches better with how customers shop. The company said that its effort appears to be having an impact already, as the home department saw the biggest percentage sales increase among its units in October.

The store is trying to recover from a failed turnaround attempt spearheaded by former CEO Ron Johnson. Penney's board ousted Johnson in April after 17 months on the job and rehired former CEO Mike Ullman.

Under Ullman, J.C. Penney has brought back frequent sales events that Johnson ditched. It's also restored basic merchandise, particularly store brands such as St. John's Bay, that was either phased out or eliminated by Johnson in a bid to attract more affluent, younger shoppers.
Under Johnson, the company brought in trendy names like Betsey Johnson and focused on every day prices, eliminating hundreds of sales.

On Thursday, J.C. Penney credited its increased October sales to restoring inventory of private brands such as St. John's Bay and Stafford. The chain said it also had significant sales increases in national brands, including Nike, Carter's, Dockers and Levi's.

Ullman said that the company is working on restoring the proper mix of private, exclusive and national brand products so that it fits better with shoppers' wants and needs and results in fewer markdowns.

The CEO said that the rise in October sales was particularly encouraging because the retailer was dealing with the federal government shutdown as well as a tough consumer environment.

Gearing up for the holidays, Ullman said the company is ready to execute its aggressive plans. This includes opening its stores on Thanksgiving night.

"We expect the holiday season to be extremely competitive, and we are ready to win," he said.

J.C. Penney will report its third-quarter financial results on Nov. 20. Its stock rose more than 6 percent, or 48 cents, to $8.18 a share in morning trading. Shares have lost 61 percent of their value since the beginning of the year and 82 percent since early February 2012 when investor enthusiasm was high over Johnson's reinvention plan.

At Costco, revenue at stores opened at least a year rose 3 percent in October, beating Wall Street's expectations for a 2.6 percent gain, according to Thomson Reuters. L Brands, owner of Victoria's Secret, Bath & Body Works and other retail outlets, reported that revenue at stores opened at least a year was up 8 percent in October, The results soared past a 2.2 percent gain that Wall Street analysts expected.


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13 Comments

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rita

Perhaps they are making honest clothes again. Their sizes were way smaller than the item said it was size wise. It was a joke to buy scaled down clothing from them. Since they fired their CEO, perhaps they went back to being honest again.

November 08 2013 at 5:20 AM Report abuse rate up rate down Reply
Velocity105

People are getting sick of PR disasters like Walmart, inferior brands marketed by Target and Kmart. They want the security and familiarity of brands they bought decades ago.

November 08 2013 at 2:44 AM Report abuse rate up rate down Reply
1 reply to Velocity105's comment
pm0501

Good luck finding American made goods at Penny's! I was there Thursday and all I found was mostly China, India, Sri Lanka, Taiwan, Pakistan, Vietnam and Indonesian made merchandise. The exception was a lot of the furniture was made in USA bit some was from Mexico. Oh and a few items in the kitchenware department.

November 08 2013 at 4:17 AM Report abuse rate up rate down Reply
Stephen

Penny customers would "come back' a lot quicker if they offered free donuts.

November 07 2013 at 11:40 PM Report abuse -2 rate up rate down Reply
dugerman85

My wife was a regular JC Penney shopper until Ron Johnson took over and changed the company\'s approach to retailing and eliminated the coupons - which she really liked. She recently started going back and just told me yesterday she really likes shopping in the store again.

November 07 2013 at 8:53 PM Report abuse +2 rate up rate down Reply
1 reply to dugerman85's comment
hattie54

I've not shopped there in awhile either.I plan on going soon.The store was in a mall which was torn down in my city.That JCP is the most $$ making one in my state so the new stores were built around it.

November 08 2013 at 12:27 AM Report abuse rate up rate down Reply
The Canoli King

I do not understand why Penny's kept Ron Johnson on board for as long as they did. It seemed to me the powers that be wanted to sink the Penny's ship,and maintained this clown johnson in charge. I seened that he was failing the Company,and I'm damn sure so did so many other's out there,and yet he was allow to continue his destruction of a once Great store. I have been back to Penny's ,and with the return of the coupons,and the lines in which this moron had remove,I do see hope. I guess we will see how the Holiday shopping goes,and I am hoping for the best.

November 07 2013 at 8:27 PM Report abuse +1 rate up rate down Reply
betty_brock

All they have is junk. I can buy that at Wally World.

November 07 2013 at 7:33 PM Report abuse +1 rate up rate down Reply
1 reply to betty_brock's comment
hattie54

I rather go to JCP and Target than Wallyworld or KMart.

November 08 2013 at 12:28 AM Report abuse rate up rate down Reply
riepenhoff

JCP IS A GREAT STORE. ALWAYS BEEN GOOD TO ME , STAYED WITH DURING ITS UP AND DOWN TIMES.I LOVE THAT STORE. IM 50 AND THATS WERE I SHOP. COME ON BACK PEOPLE AND SEE FOR YOUR SELF. THEY WILL BE HERE LONG AFTER IM DEAD

November 07 2013 at 6:23 PM Report abuse +2 rate up rate down Reply
George

I\'ve had to wait 19 weeks for a \"free\" pair of Dockers I won in THEIR promotion. Last week they called me to tell me they were in, went to pick up and two sheet sets were in my \"khaki\" package. The store said this is the third time it happened this week. Should have just bought the pants elsewhere, would have saved all that time and aggrivation. I talked to all levels of management, NO ONE will take responsibility. The store made me check in every week twice, since they couldn\'t call me. Guess I\'m not important enough to them. Guess where I will spend $0 this holiday season? JcPenny just doesn\'t care and this was at a district store in Virginia!

November 07 2013 at 5:40 PM Report abuse +2 rate up rate down Reply
Shirley

If the customers really are returning, they are not returing to much. J C Penny's hasn't been it's self for many years. Not worth the effort to check it out.

November 07 2013 at 5:35 PM Report abuse +1 rate up rate down Reply
loulou751

I'M SICK OF WAITING FOR THE RETURN OF THE OLD JCP. I SINCE DISCOVERED BOSCOVS. IT'S BETTER THAN JCP EVER WAS!!

November 07 2013 at 5:28 PM Report abuse +1 rate up rate down Reply