Forbes Staff
Maggie McGrath
Sruggling retailer JC Penney JCP +8.38% missed Street expectations with its third quarter earnings report Wednesday morning, proving that it still has a way to go before it reaches profitability. However, investors are seemingly encouraged by positive sales trends and are sending the stock into positive territory in early Wednesday trading.
Despite its October sales increase, JC Penney reported $2.78 billion in third quarter revenue, missing analyst consensus of $2.79 billion and a decrease over this time in 2012, when revenue came in at $2.93 billion. The company took a third quarter operating loss of $401 million, a figure that includes a $36 million loss from returning shares of Martha Stewart Living Omnimedia MSO -1.21%. The third quarter net loss was $489 million, resulting in a loss of $1.94 per share. Adjusted for GAAP measures, the quarter’s net loss was $457 million, or a loss of $1.81 per share. This is four cents higher than what Street analysts were expecting.
In a bit of good news, however, JC Penney said the quarter ended with a positive 0.9% comparable store sales gain in October and that sales results improved sequentially each month within the third quarter. Additionally, third quarter online sales (on jcp.com) were $266 million, a 24.5% increase over this time last year.
“Our strategies to reconnect with customers are beginning to take hold, and this became increasingly clear as the quarter progressed. This is the result of the tremendous efforts of the associates across our company to restore the merchandise customers want and deliver an unmatched shopping experience,” Mike Ullman, JC Penney CEO said in a statement Wednesday morning. “We are proud of the company’s October sales performance, encouraged by the early weeks of November, and believe we are making strides toward a path to long-term profitable growth.”
The retailer said its total available liquidity was $1.71 billion at the quarter end, against $5.6 billion in total quarter-end debt. In its year-end 2013 guidance, JC Penney said it expects total available liquidity to be in excess of $2 billion by year-end and for inventory to come in at $2.85 billion at year-end. The company also said that it expects comparable store sales and gross margin to improve sequentially and year over year. Looking ahead, Ullman expressed optimism over the upcoming holiday season, noting that the retailer launched a new marketing campaign this week that “will help remind customers that JC Penney is the destination for great holiday gifts that fit their budget.”
Shares of JC Penney immediately sunk (nearly 7%) when the earnings report was released, but more than recovered throughout pre-market activity Wednesday morning, largely because of the retailer’s positive sales trends. The stock is currently trading for more than a 5.7% gain.
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