Sales trends at J.C. Penney are improving and year end liquidity is now expected to exceed $2 billion following a recent stock offering, the company said Tuesday morning during an uncharacteristic mid-quarter update on its operating performance.
September same store sales were said to be a 580 basis point improvement when compared to August, although still down 4% from the same month the prior year, and expected to strengthen during the remainder of the year, according to the company. Online sales at JCP.com were up 25.3% in September following a 10.8% increase in August. The company also noted that actions to reconnect with core customers are showing signs of success, especially during promotional events and customer service scores are at an all time high.
"Reconnecting with our customers and getting them into our stores is a top priority. Our enhanced messaging is reminding shoppers that JCPenney's offering of trusted private brands, key national brands and unique attractions sets us apart from the competition,” said J.C. Penney CEO Mike Ullman. “Over the last six months, we have made significant strides and are now seeing positive signs in many important areas of the business, in spite of what continues to be a difficult environment for consumers and retailers in general. While pleased with the improving trends and more predictable performance, we are still in the early stages of the turnaround and will maintain a relentless focus on achieving our long-term goals for the benefit of our customers, associates and shareholders."
The announcement follows a series of recent actions to bolster the company’s finances heading into the holiday season and to provide liquidity to execute a turnaround from an earlier failed turnaround. Following the release of second quarter results on August 20, which saw sales decline 11.9% to $2.663 billion, J.C. Penney sold 84 million shares which generated $785 million. Those proceeds combined with an existing credit facility are expected to give the company year end liquidity in excess of $2 billion.
Women's and men's apparel, fine jewelry and women's accessories are performing better than the company average with women's apparel, the company's largest business, reporting positive sales for the month of September. Some of the sales improvement is related to clearance activity which is negatively affecting margins. According to the company, gross margins continue to be impacted by the overhang of inventory from the first two quarters of the year, higher levels of clearance units sold during the period and the company's transition back to a promotional pricing strategy during the second quarter of 2013.
"Reconnecting with our customers starts by having the merchandise they want and expect from J. C. Penney and finishes with an exceptional experience when they shop with us,” Ulman said. “With inventory restored to the appropriate levels, we are in stock in the key items and brands she expects to find during every visit. At the same time, our marketing will continue to capitalize on the compelling value we offer, including the sales and promotions our customers love."
Traffic trends are said to have improve at off-mall locations during the back half of September although traffic at mall-based stores remains difficult.
Another area of difficulty remains the home goods department. The company said implementing its new home strategy has been more challenging than originally planned. To date, the company said it has re-opened all but a handful of its 505 new home departments, but the merchandise assortment, shopping environment and price points have not resonated with customers, and sales trends remain weaker in stores. The company said it is working aggressively to create a more balanced assortment between modern and traditional home furnishings, with opening price points and an easy shopping environment, which includes remerchandising the home store by classification in key areas.