A stronger JC Penney emerges from the holiday season

AP News
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Posted: Jan 07, 2016 6:13 PM

NEW YORK (AP) — Talk about a comeback.

J.C. Penney reported a 3.9 percent increase in comparable-store sales during the holiday.

It was a reversal of fortunes this crucial selling season, with the usually resilient Macy's reporting late Wednesday that sales in stores open at least a year slumped 5.2 percent between November and December. Macy's is now cutting up to 4,800 jobs, reorganizing operations and closing 40 stores. It also slashed its profit outlook.

Macy's estimated that 80 percent of its decline was weather-related. J.C. Penney said warm weather did cut into clothing sales but there were other strong sellers that offset that weakness.

Gap reported sales for December that showed its continued struggles. The San Francisco-based chain, which operates stores under its namesake, Old Navy and Banana Republic, registered a 5 percent drop in revenue at stores opened at least a year. The declines were across all divisions, including Old Navy, which has recently been a bright spot for the company.

Marvin Ellison, who took over as J.C. Penney CEO last August, said that the company strived to improve its online business. It now has 250 stores that are helping to fulfill online orders as it plays catch up to other retailers. It also focused on store-label brands and improved its selection of gifts for the holidays.

Those were strong numbers for the Plano, Texas retailer, which is nearly three years into a turnaround effort following a disastrous attempt to reinvent the brand under former Apple executive Ron Johnson. The changes put into place under Johnson resulted in massive losses and plummeting sales.

Still, J.C. Penney has a long way to go before it can claim a full recovery. The company is expected to post annual revenue of $12.6 billion for this fiscal year, up nearly 3 percent from the previous year. That's remains far from the nearly $18 billion in annual revenue the company once booked.

Macy's had been a stellar performer since the recession, but over the past year or so has seen its sales growth slow. Profits are under pressure because of investments in new businesses and discounts the retailer has been forced to offer because of weak sales.

The Cincinnati company has blamed its woes on a shift in consumer spending, with Americans dishing out more money on nights out or vacations, and less on clothes.

Among other retailers that reported holiday sales was Signet Jewelers Ltd., which reported that comparable-store sales rose 4.9 percent for the eight-week period ended Dec. 26. That compared with an increase of 3.6 percent in the prior year.

Ken Perkins, president of Retail Metrics, a research firm, said that despite positive results from some stores, he's still cautious about the fourth-quarter for retailers. He now expects quarterly profits to rise 0.1 percent, down from growth of 5 percent three months ago, as more retailers are forced to slash prices.

"While sales may look good, it came at the expense of margins," he said.

J.C. Penney, Macy's and other major retailers report fourth-quarter results next month.

J.C. Penney's shares rose 26 cents, or nearly 4 percent, to $7.26 Thursday. Its shares have fallen 8 percent over the past year. Macy's shares got a bump Thursday, rising more than 2 percent, or 74 cents, to $36.89. Macy's shares have fallen more than 40 percent in the past 12 months. And Signet Jewelers shares rose nearly 5 percent to $133.28.

Gap's shares fell more than 8 percent, or $2.22, to $24.52 in after-hours trading when the news was announced. During regular markets, Gap's shares rose nearly 6 percent, or $1.45, to $26.74. Shares are down nearly 40 percent over the past 12 months.