Online Sales Buoy JCP In Challenging First Quarter

First quarter sales at J.C. Penney were down, but operating income was in the black when compared to the comparable quarter for the previous year.

For the quarter ended April 30, the department store retailer reported a net loss of $68 million, or 22 cents per share, versus a net loss of $150 million, or 49 cents per share in the first quarter of 2015. Comparable sales decreased 0.4% for the first quarter with online sales keeping comps close to flat.

An analyst average estimate from Zacks Investment Research predicted a loss of 39 cents per share for the quarter.

In a conference call presentation J.C. Penney filed with the United States Securities and Exchange Commission, the company noted that its online operation enjoyed mid-teen percentage sales growth in the first quarter versus the period a year previous, with significant SKU expansion, 22 new suppliers on board and the beta test of a new mobile app proceeding.

Net sales for the quarter were $2.81 billion versus $2.86 billion in the previous year’s comparable quarter. Operating income was $22 million versus an operating loss of $46 million in the prior-year period.

For the quarter, men’s, Sephora and footwear and handbags were the best performing divisions, J.C. Penney reported, while geographically the northeast and Ohio Valley were the best performing regions.

“The first quarter was clearly challenging from a sales perspective,” said Marvin Ellison, J.C. Penney’s CEO. “Although our business was not immune to the issues facing other retailers, I am pleased that we were able to deliver our second consecutive quarter of positive operating profit. In addition, the teams did an excellent job of proactively managing the business throughout the quarter to ensure we remained a fiscally disciplined organization. As a result, we exceeded our profitability expectations, achieving a 63% increase in EBITDA to $176 million for the quarter.”

Although first quarter sales failed to meet company expectations, Ellison said the company is maintaining its annual comp guidance of 3% to 4% as a result of the positive nature of recent sales trends, the strength of its Sephora business and the decision to accelerate the rollout of major appliances. The company did lower its full year gross margin guidance to a 10 to 30 basis points increase for the year, reflecting the rollout of appliances and the rapid growth of the online business. 

“We remain confident that our turnaround remains on track, and we are excited about our 2016 sales drivers including new Sephora locations, Center Core enhancements and our nationwide rollout of major appliances,” Ellison said. “Accordingly, we are reaffirming our $1 billion in EBITDA for 2016.”