After nine consecutive quarters of same-store sales declines J.C. Penney posted a 6.2% increase in sales for the three months ended May 3. It was the company’s second consecutive quarter of gains. Penney’s share price soared as high as 25 percent on the news, hitting $10.03 in after-hours trading.
The increase was led by sales of men’s and women’s clothing, jewelry and household goods, supported by a return to Penney’s former strategy of “old school” retailing. Merchandise offered under the old school retailing strategy is no frills and competitively priced.
Under former CEO Ron Johnson, J.C. Penney was re-positioned as an upscale destination in what became a failed attempt to attract affluent customers. The disastrous effort resulted in a first-year loss of $1 billion, and 25 percent slump in sales.
Myron “Mike” Ullman, a one-time and back-again Penney’s CEO, replaced Johnson in April 2013, and initiated the retailer’s return to its former merchandising strategy.
Customers also came back to Penney’s in increased numbers for the first time in 30 months, the company reported.
Along with robust sales and increased customer traffic, Penney’s also reported a widening of gross margins, to 33.1% up from 30.8%. Online sales increased by 25.7%, with a dollar amount not cited.
But while the news was good, J.C. Penney is still struggling, with sales at $1.1 billion below Q1 numbers for 2011, just prior to Johnson taking the helm and steering the firm into heavy losses. Penney’s posted losses for the current quarter of $352 million. The company lost $348 million for the same quarter in 2013.
Ullman is nevertheless optimistic, telling analysts, “We expect to carry this [sales] momentum into the second quarter.” Penney forecast this year’s sales growth in the “mid-single digit” range.
“The customer came back to J.C. Penney in the first quarter,” Ullman told analysts. “…[And] she likes what she saw.”