J.C. Penney Inc.’s stock is having a fashion makeover as it is up over 6 percent this morning to $9.24 after the retailer revealed improved same-store results and the settlement of a class-action lawsuit related to advertising.
The department store group reached an agreement to settle for $50 million in a false advertising class-action lawsuit that was brought in California. Class members have the option of taking a cash payment or getting a store credit. The lawsuit, filed in 2012, revolved around California customers who purchased certain J.C. Penney private or exclusive branded products in which there was a price comparison.
J.C. Penney denies the allegations and said it only settled the suit in order to eliminate uncertainties and the expense of a protracted legal battle.
Separately, Penney’s said comparable same-store sales increased 6.4 percent and that gross margin and earnings performance exceed its expectations in the third quarter. The company will release its earnings Friday.
FactSet estimates third-quarter earnings will be a loss of 57 cents a share and sales will come in at $2.88 billion. So far this year, J.C. Penney has beat analysts’ expectations.
Penney’s shares hit a low of $5.51 in January 2014 and many thought the retailer would never recover. Former chief executive officer Ron Johnson tried to replace discounts and coupons with everyday low pricing and the change was a disaster. Since then the stock and the company have slowly built themselves back up. The stock is up 11 percent for the past year.
The retailer has been expanding the Sephora beauty departments within the stores and it has been successful. More recently, the chain said it would cut 9 percent of its workforce at its headquarters in Plano, Texas.