DALLAS - J.C. Penney reported a bigger loss than expected on Friday as margins took a hit from liquidation sales. In its second quarter, Penney closed 127 stores of the 138 stores it has said it will close this year but still managed to post a sales increase of 1.5 percent.
The retailer's stock price has been trading at historic lows and closed at $3.93 on Friday, down 79 cents. That's the lowest Penney close since at least the late 1970s, according to data available. Penney's stock started trading in 1929.
CEO Marvin Ellison reaffirmed the company's full-year forecast and said the hit that liquidation sales had on margins is "isolated in the second quarter." He said closings "cannibalized" sales at other stores. "We've never liquidated this many stores at one time, and it was difficult to estimate the impact on margins," Ellison said.
"We don't have a margin problem. Selling margins in our go-forward stores" increased 1.4 percentage points, he said. While its largest apparel business improved from the first quarter, specifically in kids, clothing sales are still below a year ago. Home and beauty, including fine jewelry, salon and Sephora, shoes and handbags, posted positive sales in the quarter.
The company, Ellison said, is confident about its ability "to further strengthen our balance sheet, while driving sustainable growth and long-term profitability," he said. Sales improved in all categories from the first quarter. Traffic also improved but didn't flip to positive from a year ago and isn't expected to this year, said Trent Kruse, vice president investor relations.
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E-commerce posted a double-digit sales increase, Ellison said. And so far, based on an analysis of customer data by ZIP codes, Penney is retaining customers online from closed stores, he said. Penney has rebuilt its online organization in the last year and has linked stores with all locations now able to fill orders. In-store order pickup drives over 600,000 customer visits to stores each week, Ellison said.
The back-to-school season got off to "a strong start in August," Ellison said. "We are excited by this momentum and expect to deliver improved results in the back half of the year."
Total second quarter sales increased 1.5 percent to $2.96 billion from $2.92 billion a year ago. Penney reported a net loss of $62 million, or 20 cents a share, in the quarter ended July 29, compared with a loss of $56 million, or 18 cents a share, a year ago.
