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Soros Fund Management sells its shares in J.C. Penney

Smita Nair

Must-know: Soros Fund Management's positions in 1Q 2014 (Part 9 of 9)

(Continued from Part 8)

Soros Fund Management and J.C. Penney

Soros Fund Management added new positions in Baker Hughes Inc. (BHI), RF Micro Devices Inc. (RFMD), Devon Energy (DVN), Spansion Inc. (CODE), and Marathon Petroleum (MPC) in 1Q14. The top positions it sold include J.P. Morgan Chase & Co. (JPM), Citigroup (C), and J.C. Penney (JCP).

George Soros’ Soros Fund Management sold its position in J.C. Penney (JCP) that accounted for 1.08% of the fund’s 4Q 2013 portfolio.

Retailer J.C. Penney operates 1,094 department stores in 49 states and Puerto Rico as of February 1, 2014. It sells family apparel and footwear, accessories, fine and fashion jewelry, beauty products through Sephora inside JCPenney, and home furnishings.

Fiscal 2013 was a transitional year for J.C. Penney. It tried to stabilize its business and rebuild the company. The prior pricing and merchandising strategies didn’t yield positive results, and in April 2013, the board recalled Myron E. Ullman as CEO. Under Ullman, JCP undertook several merchandise initiatives to make assortments more compelling to customers, reintroduced some of its private brands, and returned the majority of its business to a promotional model. These efforts saw a positive response in 2013, as comparable-store sales sequentially improved each quarter, with the fourth quarter delivering JCP’s first quarterly comparable store sales gain after two years of losses.

JCP’s recent 1Q 2014 sales and earnings came in above estimates. J.C. Penney reported net sales of $2.80 billion compared to $2.64 billion in the first quarter of 2013. Same-store sales increased 6.2% and improved sequentially each month within the quarter. Women’s and men’s apparel, home, and fine jewelry were the company’s top-performing merchandise divisions in the quarter. Sephora inside JCPenney also maintained its strong performance. The company saw a net loss of $352 million, or $1.15 per share, compared with a loss of $348 million, or $1.58 per share, a year earlier. CEO Ullman noted, “Despite a difficult retail environment, our strong performance during the Easter holiday period and other key promotional events enabled us to deliver better than anticipated sales results.”

The company’s gross margin improved to 33.1% of sales from 30.8% in the same quarter last year but was negatively impacted by an increase in clearance sales as a percentage of total sales in February and March as well as negative clearance margins.

For 2Q 2014 and full year 2014, JCP expects comparable-store sales to increase in the mid-single digits. Peers include Macy’s (M), Nordstrom Inc. (JWN), Kohl’s Corporation (KSS), and Saks Inc. (SKS).

Commerce Department data indicated that U.S. retail sales saw growth of 0.1% in April after seeing a gain of 1.5% in March. However, some U.S. retailers said they saw April comparable sales above expectations. To learn more about important retail indicators, please read Market Realist’s Why you should invest in these ETFs to benefit from retail growth.

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