J.C. Penney Co. Inc.’s shares moved sharply higher Friday as investors looked past its 78.2 percent drop in third-quarter net income and focused on its improved margins and holiday outlook.
Myron E. “Mike” Ullman 3rd, chairman and chief executive officer, said the company’s sourcing operations were paying dividends in both merchandise and gross margins.
In the three months ended Oct. 31, net income fell to $27 million, or 11 cents a diluted share, from $124 million, or 56 cents, a year ago. Results came in ahead of Penney’s initial guidance, which ranged from a loss of 5 cents to earnings of 5 cents. Excluding pension-related items in both quarters, earnings from continuing operations fell to 30 cents a share from 46 cents a year ago.
Sales for the quarter decreased 3.2 percent, to $4.18 billion from $4.32 billion, and slid 4.6 percent on a comparable-store basis. Shoes and women’s apparel were the best-selling categories and the strongest region was the Southwest, where the liquidation of Mervyns last year opened up some growth opportunity.
“With higher sales levels at our intended promotional price and less at clearance price, as well as more frequent deliveries of style-right merchandise, we have much better flow-through to the bottom line,” said Ullman on a conference call, adding the company eliminated several unprofitable promotional events during the quarter.
The 1,109-door chain projected fourth-quarter earnings of 70 cents to 85 cents a share, a range that allows for some upside from analysts’ forecast of 82 cents as well as its own earlier full-year guidance in August. Coming after more cautious projections from retailers including Wal-Mart Stores Inc., Macy’s Inc. and Kohl’s Corp. earlier in the week, the upbeat outlook helped lift Penney’s shares $1.82, or 6.2 percent, to $31.21 on Friday.
The ceo also trumpeted his firm’s gross margins, which rose to 40.6 percent of sales from 38.5 percent. “The margin improvement was positively impacted by our product development and sourcing and planning and allocation expertise, which continues to give us improved inventory flow,” he said.
Penney’s will use its in-house production resources to relaunch the Liz Claiborne brand next fall under the terms of an exclusive deal cut last month. The brand will replace Liz & Co. and be carried as a full lifestyle collection in more than 30 categories.
“Liz is the most sought-after women’s apparel brand by our customers,” Ullman said. “Due to our product-development…capabilities, the brand will now be available to customers at more accessible price points than ever, a win — an improved value for the customers — and a win in gross margin improvement for us.”
The industry has been abuzz over the last month, measuring the prospects of the Claiborne relaunch against the performance of American Living, an exclusive line at Penney’s that is produced by Polo Ralph Lauren Corp. and was launched with much fanfare in 2008.
Asked on the conference call to compare the revenue potential of the two brands, Ullman said: “Right now, they’re both kind of neck and neck in terms of the size of the businesses, and they sit side by side. I think they have a very distinctive style for each — they are not the same. So I hope that they continue to compete vigorously and that both do really well.”
For the nine months, net earnings, including the impact of the pension items, fell 85.9 percent to $51 million, or 22 cents a share, on a 5.7 percent slide in sales to $12.01 billion.
“Even against this economic backdrop, consumers want to make the holiday season special for their family and friends,” Ullman said. “We expect them to shop for the most part on a very tight family budget.”
@fearofgod and @maxfieldla have teamed up on a pop-up installation. The store, located in the gallery space across from Maxfield’s Melrose Ave location, is the site of the brand’s House of God pop-up in which Fear of God founder @jerrylorenzo has created a church-inspired installation. A dozen vintage church pews sit in front of an LED screen playing 90s gospel singers in an effort to re-create an environment akin to a Southern Baptist Church, Lorenzo explained. Read more about the pop-up on WWD.com #wwdfashion (📷: Jennifer Johnson)
Known for his sleek, sophisticated American glamour, Norman Norell is the subject of an upcoming exhibition at @fitnyc. “Norell: Dean of American Fashion,” which runs from February 9 through April 14, will feature approximately 100 ensembles and accessories. His best work is exemplified by the designer’s glittering “mermaid” gowns frosted with thousands of hand-sewn sequins – like the one pictured. (📷: William Helburn) #wwdfashion
For pre-fall 2018, @balmain didn’t let go of the glitz. A crystal embroidered baseball jacket priced at around $40,000 hangs in the “couture” section of the brand’s first men’s pre-collection. Sporting the words “Balmain Army” across the back, the item took around two months to make. “When it was completed, it was like Christmas, it was like, ‘It’s done, it’s exactly what I wanted,’” said Balmain’s creative director @olivier_rousteing during a tour of the collection in a Paris showroom on Monday. #wwdfashion
Eighty degree temperatures and outdoor installations at the annual Art Basel Miami Beach called for bright, elevated beachwear. See more street style pictures on WWD.com. #theyarewearing #ABMB (📷: @lifeinreverie)
Following September’s emotional tribute to her brother Gianni, Donatella Versace wanted to bring the spring show’s deep sense of intimacy to her @versace_official pre-fall collection. Donatella found inspiration in Versace Palazzo in Milan and from Gianni’s opulent apartment. Archival patterns and new motifs were splashed on silk shirtdresses and fitted jersey frocks. See the rest of the photos on WWD.com. #wwdfashion
Demna Gvasalia continues to shake up the Paris fashion calendar — and experiment with new runway timetables for his @vetements_official brand. WWD has learned that Vetements plans to stage its next coed show for the fall 2018 season on January 19 during Men’s Fashion Week in the French capital. Details about the timing and venue have not been confirmed — stay tuned on WWD.com to catch the latest. #wwdnews (📷: @giovanni_giannoni_photo)
@zacposen's go-to holiday gift? Cookies! "I'll usually bake cookies and send them as a gift," said the designer, who recently released his cookbook "Cooking With Zac: Recipes from Rustic to Refined." Get the recipe for his Brown Butter-Chocolate Chip Cookies via link in bio 🍪🍪🍪 #wwdeye #cookingwithzac
For @monsemaison’s pre-fall 2018 collection, Fernando Garcia and Laura Kim honed in on the brand’s many signatures — men’s wear, which was tweaked and feminized through deconstruction, proportion play and lots of bare shoulders. See the rest of the photos on WWD.com #wwdfashion (📷: George Chinese)
On Friday night, @yohjiyamamotoofficial received the Design for Asia Lifetime Achievement Award in Hong Kong. The 75-year-old designer has been celebrated for many years and is best known for his dark and avant-garde tailoring. “In my long career, in design, architecture, [I’ve been to] so many parties, this is the very first time that I have such a warm feeling, I really appreciate this,” Yamamoto said. #wwdfashion (📷: @dominiquemaitre)