Liquidation efforts took a toll on J.C. Penney in its second quarter, which reported earnings and same-store sales below estimates.
Penney's net loss widened to $62 million in the quarter ended July 29, or 20 cents per share, from $56 million, or 18 cents per share, in the year-ago period.
Excluding one-time items, Penney's lost 9 cents a share, greater than the expected loss of 5 cents. Penney said the liquidation of inventory in 129 closing stores during the quarter had a negative impact on earnings and gross margins.
"These events were isolated to the second quarter," said Marvin Ellison, chairman and CEO, J.C. Penney. "As such, we are reaffirming our EPS guidance for the year, and remain confident in our ability to further strengthen our balance sheet, while driving sustainable growth and long-term profitability for J.C. Penney. To that end, we are pleased that we are off to a strong start in August for the all-important back to school season. We are excited by this momentum and expect to deliver improved results in the back half of the year."
Revenue rose 1.5% to $2.96 billion, better than analysts’ forecast of $2.84 billion. Same-store sales fell 1.3%, compared with an expected decline of 1.2%.
Home, fine jewelry, footwear and handbags, Sephora and salon were the company's top performing divisions during the quarter. Geographically, the Southwest and Southeast were the best performing regions.
On the chain's quarterly call, Ellison said Penney plans to boost its underperforming women's apparel offerings, with a better and expanded assortment and an emphasis on more casual and contemporary stylings. It plans to launch new lines in the fall. The company recently announced a new brand inspired by the TV show "Project Runway."
In a note, Neil Saunders, managing director of GlobalData, said that while Penney's second quarter performance was underwhelming, the company is moving in the right direction.
"Strategically, this is a year of advancement: Longstanding problems are being remedied, the balance sheet is being strengthened, and the business is on a more stable footing," he said.
"This is the platform on which growth can be built, but that growth won't come through until 2018 at the earliest." For more of Saunders' commentary, click here.