J C Penney second-quarter financial results beat estimates

J C Penney second-quarter financial results beat estimates

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J C Penney Company Inc (NYSE:JCP) posted lower-than-expected loss for the second quarter, citing stronger demand for home items and expensive Sephora beauty products. The results indicate that the company’s turnaround efforts have started paying off.

The department store operator has been expanding its stores run by the famous beauty brand Sephora to entice more customers.

Chief executive at research firm Conlumino, Neil Saunders said that Sephora has helped the company to drive sales and it also encourages customers to visit stores, which in turns helps in boosting consumer traffic. Saunders added that those shoppers may then go to purchase other things.

Following pressure from activist investor Bill Ackman, JCP has established more Sephora shops within its stores. Sephora outlets represented 12 percent of JCP’s sales one year ago, along with women’s accessories. The company had 515 Sephora stores as of July 31.

Saunders said that JCP’s home products are performing well because it has comparatively less competition than fashion.

The company reported a loss of $138 million, or 45 cents a share for the second quarter, narrower than $172 million, or 56 cents a share last year. Excluding items, JCP posted a loss of 41 cents per share. Revenue for the quarter came in at $2.88 billion, up 2.7 percent from the same period one year ago.

Analysts surveyed by Thomson Reuters I/B/E/S had predicted a loss of 48 cents a share on $2.86 billion in revenue.

J.C. Penney will take around 18 months to move into constant profitability, Saunders said.

The company’s results are usually compared with other higher-end operators of department stores, including Kohl’s Corp and Macy’s Inc. Both the companies announced profit and sales below consensus forecast this week.

JCP sales have been increasing since it postponed its efforts to move upmarket two years ago, restoring traditional discounts and concentrating on narrower set of goods.

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