JC Penney reported a net loss of $101 million in the second quarter, more than double the 2017 Q2 loss of $48 million, while its comparable sales inched up 0.3%. The company said a 7.5% decrease in net sales to $2.76 billion was due primarily to the closures of 141 stores in 2017.
“We had a strong start and finish to the quarter, with both May and July comps delivering ahead of our annual comp guidance range,” said JC Penney CFO Jeffrey Davis during an earnings call. “Overall we are confident that our renewed focus on (women’s apparel) is having a beneficial impact. This was evidenced by the positive comp sales performance in women’s and children’s apparel, both of which meaningfully out-performed our total Q2 comp results.”
Davis said JC Penney saw continued strength in its activewear business including both its national and private brand assortments. He added the company has seen substantial improvements in sales trends across its business wear and swimwear with both delivering positive comps. David also said Penney’s plus-size business is gaining momentum, up double digits, while the Claiborne brand continues to resonate with its core customers, delivering strong comps.
During the quarter JC Penney adjusted its approach to inventory management from “buying to store capacity” to “buying and chasing” into demonstrated sales trends.
“Inventory receipts continued to outpace total sales performance this quarter due to prior purchase commitments,” said Davis. “As such we took necessary actions to mark down and clear excessive inventory positions across many of our categories, which encompasses more than just seasonal product or fashion misses.”
Davis said it will continue to take actions to right size inventory and better curate its assortment.
Children’s, jewelry, Sephora, women’s apparel and salon were the company’s top-performing divisions and categories during the quarter.
“As we look through the second half of the year, we will continue to focus our efforts on improving apparel, delivering a best-in-class beauty experience, taking advantage of available market share opportunities and enhancing our ecommerce operations,” said Davis. “In apparel, we will continue our expansion into activewear through great partnerships with key brands like Nike, Adidas, Champion and Puma and expand the number of stores carrying these brands in our updated call shops and kids’ partners.”
Davis said JC Penney will launch later in August, offering an expanded assortment of hard goods and accessories.
“We also delivered in and toys, and partnered with key national brands that are now looking for new channels to grow their business,” he said.
Davis said JC Penney is taking immediate actions to right-size its inventory, hoping to reduce it by at least $250 million by the end of fiscal 2019.