Penney has a merry Christmas

While J.C. Penney probably has not won over all its critics, yesterday’s announcement that the company achieved a same-store sales gain of 3.7 percent during November and December was enough to lift its shares 16 percent higher in after hours trading.

Penney’s holiday sales performance exceeded analyst expectations. According to Retail Metrics, via The Dallas Morning News, analysts were expecting 2.7 percent comp growth. This is a positive sign following flat year-over-year same-store numbers reported by Penney during its third quarter.

"Our highest priority over the last year has been to restore profitable sales growth at J.C. Penney. This holiday season was instrumental in that effort — and our teams delivered. I would like to thank our associates for their hard work, warrior spirit and commitment to delivering an exceptional customer experience every day," said Mike Ullman, chief executive officer, in a statement. "Customers clearly responded to our combination of great merchandise and compelling promotions this holiday season. We are proud of these results, and believe the work we are doing will fuel the continued growth of our business."

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Penney’s improvement during November and December provided a nice welcome for the company’s new president and CEO-designee, Marvin Ellison. Mr. Ellison most recently served as executive vice president of U.S. stores for Home Depot. Before joining Home Depot, he spent 15 years at Target in a number of operational roles.

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Discussion Questions

What factors do you see working for and against J.C. Penney’s turnaround? Do you think it has arrived at the right mix of merchandise and promotions to continue posting gains in the quarters to come?

Poll

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Dick Seesel
Dick Seesel
9 years ago

J.C. Penney has focused on error correction to undo a lot of the damage inflicted during the Ron Johnson era. (I’ve described it as “turn back the clock.”) The holiday sales report is a good upside surprise, considering the flat third quarter and the suggestion (on the last earnings call) that November started off slowly. These numbers probably bode well for other retailers, too, especially if they had soft 2013 comparisons.

I’m still not convinced, however, that J.C. Penney has it all figured out. They may have hit on the right promotional cadence, but the merchandising (especially in the women’s zone) looks over-assorted, as it did back in 2010-11. And the company under its new leadership will need to take more aggressive steps to address its uncompetitive SGA model, not just relying on rising gross margins.

Paula Rosenblum
Paula Rosenblum
9 years ago

J.C. Penney is still up against very soft numbers and has the opportunity to gain share against Sears (like everyone else). I don’t think they’re back yet to 2011 sales levels.

I will say that I think the company has really launched a great and consistent marketing campaign, and that is no small feat.

Where it goes from here is very unclear. Sooner or later, it’s going to have to start taking business from stronger competitors. That will take better marketing and store facelifts to excite new customers.

Will it succeed? Hard to say.

Ed Rosenbaum
Ed Rosenbaum
9 years ago

I can’t see where they are “back,” because they have been so far behind for so long. The improvement is noteworthy. But we must remember it is an improvement over weak numbers from the previous years.

Gordon Arnold
Gordon Arnold
9 years ago

If you walked the malls during the holiday season and looked around during the jaunt from one big box to another you probably didn’t see the reason for J.C. Penney’s success. It was right in front of you disguised as walls and walls of information. This information, or signage if you will, is now throughout the country and measuring in the thousands of miles. While the information is helpful and attractive it is also designed to divert one’s attention from the obvious.

What is less obvious is the millions of square feet of store space not in use because of the tremendous shortages of small businesses lost to this invisible economic recovery we have been in for eight-plus years. Another observation one might see was just how orderly the holiday crowds were this season. So much so that I am confident that the stores still open in the malls would, if they could, order more crowds to help with sales. A savvy investor will dismiss same-store sales for a look at the real cash-flow indicators, as in margin and business expenditures. Closer attention to inventory levels and loans to meet the holiday needs will also be telling. You must look under the makeup to see how good things really look in any malignant economy like the one we must live in.

Lee Kent
Lee Kent
9 years ago

The sad thing is that I believe Ron Johnson was taking JCP in the right direction, but with the wrong approach. Now, they have simply done what was necessary to undo and regain their lost customer base. Putting them right back at square one with a sagging market and lackluster offering.

At least they are stable now, giving them more hope for success, but this will all depend on the new leadership. I’m just not so sure an operations guy was the right move but hey, good luck Marvin!

And that’s my 2 cents.

Carlos Arámbula
Carlos Arámbula
9 years ago

It might be early to call the season’s sales increase a “turnaround.” I would like to see a positive trend reflecting increased sales and traffic to call it a turnaround.

The economy was better this holiday season than recent years. I believe a lot of retailers had a good season, and I would venture that the Penney’s consumer target was in a better economic situation this year compared to recent past.

Craig Sundstrom
Craig Sundstrom
9 years ago

Penney’s faces two challenges. First from the customers: getting enough of them in the door(s) and getting them to buy enough to be profitable. Second, from the analysts, “activist” investors and other unhelpful sorts who stand to gain just as much or more from failure than success. Once the numbers tail off—if they haven’t already—expect the latter to be out in full force.

My own take is that the numbers are underwhelming: quarter after quarter of double-digit declines really needs to be matched by quarter after quarter of double digit increases (or at least a few of them). Three percent and change is more a number that a mature retailer—that was doing well in the first place—should feel comfortable with. I guess a miraculous recovery may be just that.

Kai Clarke
Kai Clarke
9 years ago

Aggressive change requires organizational behaviors that need to continue changing in order for JCP to reflect continued market growth. This includes better customer service, demonstrating current trends in their stores at aggressive prices, and eliminating out of stocks, fashion gaps, and other destination hurdles that have hurt JCP in the past.