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J.C. Penney Narrows Q3 Loss on Stronger Sales, Lower Costs

J.C. Penney Company, Inc. (JCP) announced third quarter sales and earnings results Friday morning that beat Wall Street estimates, but failed to increase its full-year sales estimates.

Net sales for the three months ended Oct. 31 increased 4.8% to $2.89 billion from the prior year period, slightly ahead of the $2.87 estimates. Same store sales increased 6.4%, beating the 5.6% forecast.

All merchandise divisions reported positive comp sales gains. Men’s, home, footwear, handbags and Sephora were among the top performing divisions. Geographically, all regions experienced sales growth compared to the same period last year, with the best performance in the southern and western regions of the country.

CEO Marvin Ellison said, “The continuation of our strong sales performance this quarter demonstrates ongoing progress towards achieving the company’s long-term financial targets. We grew the top line, improved margin and intensified our expense discipline. As we look ahead to the fourth quarter, we are well positioned to compete effectively during the key holiday shopping period thanks to the hard work and dedication of all our associates.”

Gross margin improved by 70 basis points to 37.3% of sales, which the company attributed to improvements in the clearance and promotional selling margins and supply chain productivity.

SG&A expense fell $41 million to $947 million or 32.7% of sales, representing a 300 basis point improvement from the prior year due primarily to lower store controllable costs, more efficient advertising and improved private label credit card revenue.

The company posted a net loss of $137 million, or $(0.45) per share, a 27 percent improvement in net income over the prior year to a loss of $188 million, or $(0.62) per share, and better than the $0.58 per share loss expected by analysts.

J. C. Penney reiterated its estimate of 2015 comparable store sales growth at between 4 percent and 5 percent, which might explain the pre-market decline in stock price.

“While there is significant work to do to improve our company, the J. C. Penney team remains determined to regain our status as a world-class retailer,” Ellison said in a statement.