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J.C. Penney in big miss on profit, sales in Q1

BY Marianne Wilson

J.C. Penney got off to a rough start in the new year as it joined fellow department store operators Macy’s, Kohl’s and Nordstrom in reporting disappointing sales results.

Penney’s net loss widened to $180 million, or 58 cents per share, in the first quarter, ended April 29, from $68 million, or 22 cents per share, in the year-ago period. The company noted it had $220 million of restructuring charges associated with store closings and a voluntary early retirement program during the quarter. The loss was less than the Street had expected.

Revenue totaled $2.71 billion, down from $2.8 billion last year. Analysts had expected sales of $2.77 billion. Same-store sales fell 3.5%, which was more than expected.

Penney said its home, Sephora, fine jewelry and salon departments all comped positively for the quarter and were the company's top performing divisions. The retailer continues to expand its in-store Sephora concept to additional locations.

“The real challenge for JCP is how to persuade customers visiting Sephora to become loyal JCP shoppers who visit and spend in other areas of the store,” commented Neil Saunders, managing director of GlobalData Retail.

The analyst noted that the area most in need of attention at Penney is fashion.

“Despite the enhancements made to-date, the offer is still not compelling enough to drive sales,” he said. (For more of his comments regarding Penney, click here.)

“While February was a very challenging month for J.C. Penney and broader retail, we are pleased with our comp store sales for the combined March and April period, which improved significantly versus February,” said Penney chairman and CEO Marvin Ellison. “The recent sales trends, combined with the improvement in women's apparel and our growth initiatives led by Sephora inside J.C. Penney, jcp.com and major appliances, provide us with the confidence to maintain our sales guidance for the full year. Additionally, our investment in pricing and merchandising systems allowed us to deliver a 10 basis point increase in gross margin over last year, in light of the growth in appliances and e-commerce.”

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