JCP J C Penney Company Inc

By Austen Hufford 

J.C. Penney Co. narrowed its quarterly loss and broke with department store rivals in reporting a sales increase Friday, signs that its turnaround is gaining traction.

Shares, up 27% over the past three months, increased 4.5% to $10.39 in late morning trading in New York. Penney's results came after rivals Macy's Inc., Kohl's Corp. and Nordstrom Inc. reported declining sales but saw their stocks jump because the results still surpassed expectations.

Department stores have reported falling profits and lower sales as shoppers are increasingly turning to discount chains and online operators such as Amazon.com Inc. for their clothing and apparel needs. In response, store operators have closed locations and aggressively reduced expenses.

Chief Executive Marvin Ellison told analysts Friday that the company's physical footprint is important to increasing sales online. Ellison said e-commerce competitors who think they can fully compete without store locations are "in for a rude awakening."

During the quarter, the company expanded its same-day, in-store pickup for online buyers throughout the chain, saying it reduces shipping costs and that a significant proportion of pickup customers buy additional goods while in-store.

Penney also has tried to expand into areas that are more difficult to buy online, such as appliances. The retailer said it would return to selling appliances in May after a more than 30-year absence. In the quarter, Penney rolled out appliances to more than 120 locations.

Friday, Penney said sales at existing stores grew 2.2%, and the retailer backed its same-store sales guidance for the year, expecting growth of 3% to 4%.

In all for the quarter, Penney's posted a loss of $56 million, or 18 cents a share, compared with a loss of $117 million, or 38 cents a share, a year prior. On an adjusted basis, which excludes restructuring and debt extinguishment costs, the loss was 5 cents a share.

Revenue rose 1.5% to $2.92 billion.

Analysts polled by Thomson Reuters had expected an adjusted loss of 15 cents a share on revenue of $2.93 billion.

Gross margin was 37.1%, compared with 37% a year prior. The company said its profitability is expected to be hurt in the year by the company's expansion online and into appliances.

Penney said that in the recently completed quarter, Sephora, home, and footwear and handbags were among its top-performing divisions.

On Thursday, Macy's said it would close 100 stores as shoppers continue to spend more online and at discount chains. Meanwhile, Kohl's also cut its profit target for the year, and Nordstrom said it took increased markdowns to clear excess goods.

Write to Austen Hufford at austen.hufford@wsj.com

(END) Dow Jones Newswires

August 12, 2016 11:46 ET (15:46 GMT)

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