J.C. Penney Co. Inc. unexpectedly cut its first-quarter loss by more than half and lifted guidance for same-store sales and gross margins for the year.
Myron “Mike” Ullman 3rd, scheduled to be succeeded as chief executive officer by Marvin Ellison on Aug. 1, said key metrics including sales, gross margin and earnings before interest, taxes, depreciation and amortization showed improvement.
“This year, we are switching gears, going on the offensive to gain back share and grow our business profitably while executing our vision to become the preferred shopping choice for Middle America,” Ullman commented.
While Penney’s ongoing attempts at a turnaround didn’t result in a profit in the first quarter, it came closer than Wall Street expected. The net loss for the three months ended May 2 was $167 million, or 55 cents a diluted share, versus a loss of $352 million, or $1.15, in the comparable 2014 period.
Adjusted earnings per share was a loss of 57 cents a diluted share, 20 cents better than the 77-cent loss expected, on average, by analysts tracking the firm.
Revenues just missed consensus estimates of $2.87 billion, finishing the quarter up 2 percent at $2.86 billion versus $2.8 billion in the year-ago quarter. Same-store sales rose 3.4 percent, a clear indication of some recouping of market share during a period characterized by sluggish department store performances.
Gross margin improved to 36.4 percent of revenues from 33.1 percent a year ago.
As it did following the conclusion of last year’s fourth quarter, Penney’s turned to EBITDA to flash some black ink. It boasted of a $168 million improvement in EBITDA quarter-on-quarter, with the most recent period’s a positive $79 million versus a negative $89 million result a year ago.
The company isn’t providing guidance for sales and net income for the year, but it raised several of its projections for other metrics. Gross margin, originally expected to improve between 50 and 100 basis points for the year, is now seen rising between 100 and 150 points. Selling, general and administrative expenses, earlier seen dropping between $50 million and $100 million for the year, is now projected to fall $100 million. EBITDA, for which the company hadn’t provided previous guidance, is now seen hitting about $600 million for the year.
“Based on our results to date, including a strong Easter and Mother’s Day, we feel confident in raising our 2015 expectations for sales, gross margin and SG&A,” Ellison said.
In the just-concluded quarter, SG&A declined 4.4 percent to $965 million, a $44 million drop.
Penney’s said women’s and men’s apparel and home were its top-performing merchandise divisions in the quarter and also noted that Sephora, recently expanded to 515 of Penney’s 1,020 stores, “continued its strong performance.”