In a recent regulatory filing, J. C. Penney Company, Inc. (JCP) revealed that its key sales barometer has improved in September from August and is expecting to last through the remainder of 2013 owing to its turnaround efforts. Moreover, the department store chain retailer expects to end the year with adequate liquidity.
The Plano, Texas-based retailer announced that its sales for the month of Sep 2013 has declined 4% year over year but has improved sequentially from a decline of 9.8% registered in the month of Aug 2013. Moreover, the company’s online sales remain strong as reflected in the year–over-year growth of 25.3% in September. Further, for the third quarter-to-date period, sales from J. C. Penney’s online channel rose 18.6%.
The company also witnessed a year-over-year growth in units per transaction as well as average transaction value during September, while average unit retail was below the prior year figure.
Furthermore, the company expects its gross margin to be under pressure due to lower clearance margins in the first half of fiscal 2013 and increased promotional pricing strategy in second-quarter fiscal 2013.
From the financial perspective, J. C. Penney expects to have over $2.0 billion of liquidity at the year-end. Last week, the company closed a public offering of 84 million shares that garnered net proceeds of approximately $785 million.
J. C. Penney has been in troubled waters for quite some time, and has been grappling with waning revenues and higher losses. The company has not shown any signs of recovery in the recent past. This is evident from its 7th consecutive quarter of sluggish results on Aug 20. Moreover, the company has been constantly lagging its peers, Macy’s Inc. (M), Target Corp. (TGT) and Kohl’s Corp. (KSS) in terms of performance.
To improve the situation and boost shareholders’ confidence, J. C. Penney has taken several strategic initiatives to drive traffic and conversion. The company brought back promotions that we believe could be a successful sales driver as it is driving a favorable response.
Furthermore, we believe that J. C. Penney’s well-diversified supplier base, compelling national and private-label brands, effective marketing campaigns, point-of-sale technology initiatives as well as effective cost and inventory management will increase both sales and margin in the long run. The company is trying every means to uplift itself in order to deliver comparable-store sales growth and boost market share.
However, investors remain cautious about the stock, as the company’s endeavors to recover and give itself a major facelift are still in the early stages. We have to wait and see whether the initiatives undertaken to revive the stock become successful.
Currently, J. C. Penney carries a Zacks Rank #3 (Hold).