JCPenney had quite an unexpected Q3: its comparable store sales increased 1.7% — more than double the company’s own 0.6% to 0.8% growth forecast. However, the department store still has a long way to go if it wants to recoup its losses, even after closing more than 130 stores in 2017.
These store closures contributed to JCPenney’s 1.8% net sales decline, according to a company statement. The retailer’s quarterly net losses widened from $67 million ($0.22 per share) a year earlier to $128 million ($0.41 per share), partly due to heavy discounting to clear slow-moving inventory. The department store specifically targeted women’s apparel as the target of its inventory “reset.”
Marvin Ellison, CEO of JCPenney, noted in the Q3 earnings call that the clearance efforts have been a success despite the short-term negative impact on profitability: “Following the reset we saw improved performance in our women’s division, confirming that these actions were necessary to drive growth in this high-volume apparel division,” Ellison said. “In fact, women’s apparel delivered a positive comp for the month of October even when you remove the benefits of the accelerated clearance sales. Although we are not declaring victory, this was the first positive comp for a month in this category in 14 months.”
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In Q3, JCPenney increased online SKUs by more than 50% and factory-shipped SKUs by over 100%. Appliances sold grew 120% year-over-year, including a 30% category growth rate for stores that had showrooms a year ago.
After the quarter’s end, JCPenney reorganized its merchandising department, eliminating the recently vacated Chief Merchandising Officer position. Ellison noted in the call that the company seeks to take a page out of fast fashion’s playbook by introducing new merchandise both in-stores and online on a monthly — and in some cases even weekly — basis.
