JCPenney's Upcoming 2Q15 Results: Should Investors Be Optimistic?
Second quarter results
On August 10, 2015, JCPenney (JCP) is expected to announce its results for the second quarter of fiscal 2015, which ends August 1, 2015. The consensus Wall Street analyst net sales estimate for 2Q15 is $2.9 billion.
In the first quarter of 2015, JCPenney reported net sales of $2.9 billion, which was in line with consensus Wall Street analysts’ estimates.
Sales growth drivers in 1Q15
JCPenney’s sales in 1Q15 grew 2.0% on a year-over-year basis, driven by strong performance in women’s and men’s apparel, Sephora, and home merchandise. In particular, men’s and women’s tailored clothing, dresses, and handbags boosted sales. The company’s online business also performed well in the quarter, driven by its investments in inventory.
Performance of peers in 1Q15
JCPenney’s sales growth in 1Q15 surpassed rivals Macy’s (M) and Kohl’s (KSS). Macy’s 1Q15 sales fell 0.7% due to unfavorable weather conditions and shipment delays caused by the West Coast ports dispute. Net sales for Kohl’s grew 1.3%. Upscale department store Nordstrom (JWN) continued to impress investors with its sales growth of 9.7% in 1Q15. Nordstrom’s sales growth was driven by strong growth in its online business and off-price Rack stores. Macy’s, Nordstrom, and Kohl’s together constitute ~3.1% of the portfolio holdings of the SPDR S&P Retail ETF (XRT).
Key focus areas
JCPenney is relying on three opportunities to drive sales growth:
- an omnichannel approach, which aims to provide a seamless shopping experience in stores and online channels
- pursuit of its center core strategy, which focuses on the areas with the highest concentration of shoppers, like fashion jewelry, shoes, handbags, and intimate apparel – The company’s Sephora stores within J.C. Penney stores are a vital part of this strategy.
- a focus on home merchandise
In addition to the above strategies, the company is aggressively focusing on its private brands to drive sales and margins.
After reporting sales declines in all four quarters of fiscal 2013, JCPenney’s sales grew in three out of four quarters in fiscal 2014, helped by the company’s turnaround efforts.
In this series, we’ll discuss JCPenney’s outlook, analysts’ expectations for the company’s second quarter results, and the company’s strategy for the upcoming quarter.
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