JCPenney’s shares jumped on Friday after it reported a lower-than-expected quarterly loss, boosting investor confidence in its turnaround strategy.
CEO Jill Soltau, who has been leading the turnaround effort since joining the ailing retailer last year, described the third quarter as “an exciting and energizing time at JCPenney as we made significant progress on our efforts to return JCPenney to sustainable, profitable growth.”
For the quarter, sales fell 10.1% to $2.38 billion from $2.65 billion a year earlier, missing expectations for $2.51 billion. But Penney’s net loss narrowed to $93 million, or 29 cents per share, from $151 million, or 48 cents a share, a year earlier.
On an adjusted basis, Penney lost 30 cents a share, better than analysts’ expectations of a loss of 55 cents, as the company benefited from lower marketing expenses and an increase in selling margins.
“We are beginning to see results – both in our numbers and how we operate as a business – from the early implementation of our Plan for Renewal, which is focused on driving traffic, offering compelling merchandise, providing an engaging experience, fueling growth, and building a results-minded culture,” Soltau said.
She also expressed confidence that her strategy will “return JCPenney to its rightful place in the retail industry.”
Penney’s stock surged more than 22% at one point during premarket trading before falling back to $1.20, a gain of 7.6% on the day. The third-quarter results gave investors “some hope” that Soltau’s turnaround efforts are “gaining traction,” Barron’s said.
But Penney’s same-store sales, a key retail metric, were down 9.3% and, for the year, it is still calling for comparable sales to be down 7% to 8%. The big drop in sales says “customers continue to desert the brand in droves,” Neil Saunders, managing director of GlobalData Retail, told the Dallas Morning News.
Soltau has been seeking to revive the Penney brand by, among other things, adding yoga studios and holding styling classes in stores to appeal to younger customers. “This organization has a lot of problems to fix,” she said in an earnings call.