J.C. Penney Co. (JCP) swung to the black in its fiscal second quarter after booking prior-year pension expenses, but the department-store chain continues to trail some main rivals as it digests changes in its clearance strategy and catalog offering.

Shares were down 2% to $20.38, as the company gave a cautious third-quarter view and cut its earnings target for the year to the range of $1.40 to $1.50 a share from $1.64, below analyst estimates. Penney's stock is down 23% so far this year.

J.C. Penney forecast third-quarter earnings of 16 cents to 20 cents on revenue growth of 1% to 2% and a same-store sales increase of 2% to 3%. Analysts polled by Thomson Reuters projected a 24-cent profit and 1.9% revenue increase to $4.26 billion.

"What it reflects is a conservative approach to what continues to be an uncertain consumer climate, particularly for the moderate consumer," Chairman and Chief Executive Myron Ullman III said of the forecast on a conference call.

He said the company's customers "tend to be more urban, more ethnic and more impacted by the economy than many others in the overall retail landscape," and that's made them particularly sensitive to fits and starts in the job market and constrained credit opportunities.

As for the latest quarter, Ullman said benefits from shaking up the company's merchandise assortment, which included introducing "wear-now" clothes appropriate for the current season, were partly offset late in the quarter by changes in its Red Zone clearance program and the discontinuation of Big Book catalogs. The company stressed, though, that the clearance strategy is working.

J.C. Penney said the high-stakes back-to-school season is "off to a good start," though much of the activity will likely come as states roll out tax-free shopping events closer to the start of school.

The store has lost some market share to rival Macy's Inc. (M) this year after they were neck-and-neck for much of 2009 in a battle for more frugal consumers. Macy's and Kohl's Corp. (KSS) earlier this week both reported improving sales but remained cautious about the outlook for coming months.

J.C. Penney is trying to refresh its offerings to recapture consumer interest. Rolling out new products from Mango, Liz Claiborne and The ALDO Group, the company said it will continue to install shop-within-a-store concepts by beauty supplier Sephora. Sales at locations with Sephora boutiques are trending 1.5% ahead of those without Sephora, the company said. It will end the year with Sephoras in 231 of its locations.

For the quarter ended July 31, J.C. Penney reported a profit of $14 million, or 6 cents a share, compared with a prior-year loss of $1 million, which included a pension expense of $83 million. The company last week said it expected to report a profit at the lower end of its prior estimate of 5 cents to 8 cents. Results from the most recent period include a charge of 5 cents a share from bond premiums related to a debt tender offer completed in May.

Gross margin rose to 39.4% from 38.5% on improved sales and cost controls.

J.C. Penney last week reported total sales edged down 0.1% to $3.94 billion, as same-store sales rose 0.9%. That compares with prior-year declines of 7.9% and 9.5%, respectively. Sales were driven by men's apparel and women's accessories. Internet sales rose 4%.

Analysts polled by Thomson Reuters had expected earnings of 24 cents a share, excluding items, on $4.01 billion of sales.

-By Melissa Korn and Tess Stynes, Dow Jones Newswires; 212-416-2271; melissa.korn@dowjones.com
Kohls (NYSE:KSS)
Historical Stock Chart
From Jun 2024 to Jul 2024 Click Here for more Kohls Charts.
Kohls (NYSE:KSS)
Historical Stock Chart
From Jul 2023 to Jul 2024 Click Here for more Kohls Charts.