Penney shares up after upbeat outlook

A June 19, 2012 photo shows a sign at a JC Penney store in Oklahoma City. The mid-price department store chain reported  Friday Aug. 10, 2012, a bigger-than-expected loss and plummeting sales during the second quarter, as its customers remain confused by the new pricing strategy that ditched hundreds of sales in favor of every day lower prices. (AP Photo/Sue Ogrocki)


JC Penney Co. delivered strong fourth-quarter results, wrapping up a year when it stole market share from rivals.
The company, based in Plano, Texas, offered an upbeat sales outlook, as efforts to spruce up its merchandise are winning over shoppers. It also pledged that it would return to a profit this year, on an adjusted basis. Investors cheered, pushing shares up nearly 15 percent.
The results were a bright spot in an otherwise dismal holiday quarter, where department store rivals like Macy’s and Kohl’s offered disappointing outlooks after struggling with weak sales.
It was a reversal of fortunes this critical holiday season for Penney, which is clawing its way back from a failed reinvention plan that caused catastrophic losses and plunging sales.
And the latest performance offers encouraging news that a transformation by CEO Marvin Ellison is in the works. Ellison officially took the helm in August 2015, after a nine-month transition period working closely with Myron Ullman, who returned to the top CEO spot in April 2013 when the board fired Ron Johnson. Johnson got rid of most promotions and replaced them with everyday low prices and swapped basics for trendy assortments in a bid to grab higher-income, younger shoppers.
Ullman stabilised the business by bringing back discounts and restoring store-label merchandise. Ellison’s goal is to expand sales and remake the retailer to be more nimble.
The company is playing catch up in e-commerce, including rolling out services that allow online shoppers to pick up orders in stores. It’s using its store-label offerings as a key weapon to fight against pricing pressures from online rivals. It’s also testing appliances and just rolled out a new campaign called “Get Your Penney’s Worth,” which will offer certain store-label items for pennies. Ellison noted that the Penney campaign should help to broaden its demographic, which centers on middle-income shoppers with an annual average household income of $60,000.
J.C. Penney still has a long way to go before it can claim a full recovery. The company posted annual sales of $12.6 billion for the year ended Jan. 30, up 3 percent from the prior year. Still, that’s far below the nearly $18 billion in annual revenue once booked right before Johnson came to the helm in November 2011.
But Penney is making some good progress given a tough environment, particularly in department store arena, where shoppers are being selective.
Ellison told investors during a conference call Friday that it’s evident that Penney gained market share in 2015.
“Our ability to gain share in a relatively flat to negative retail market is not accidental,” he said. He also assured analysts that the company is testing different initiatives before rolling them out. Penney had learned painful lessons from Johnson who rolled out the bold pricing strategy without testing in the stores.
The company operates 1,060 department stores in 49 US states and Puerto Rico, and previously operated a cataloug business and several discount outlets. In addition to selling conventional merchandise, its stores often house leased departments.

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