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RAPAPORT... J.C. Penney Company Inc. reported that sales rose 6.3 percent year on year to $2.8 billion in the first quarter that ended on May 3. Same-store sales increased 6.2 percent. Cost of goods sold rose 2.9 percent to $1.9 billion and gross margin improved to 33.1 percent compared with 30.8 percent one year ago. The retailer's loss grew 1 percent to $352 million or $1.15 per share. Top-performing merchandise categories during the first quarter included apparel, home goods and jewelry, according to the retailer. Sephora inside JCPenney also continued to perform well.
Myron Ullman, III, the CEO of JCPenney, said, "We are very pleased to report that JCPenney delivered its second consecutive quarter of comparable-store sales growth, as well as continued gross margin improvement. It is clear that our efforts to re-merchandise many areas of the store and revamp our messaging to the customer are taking hold. Despite a difficult retail environment, our strong performance during the Easter holiday period and other key promotional events enabled us to deliver better than anticipated sales results. We expect to carry this momentum into the second quarter as we continue to position the company for long-term profitable growth." The retailer plans to "simplify" its same-store sales calculation to reflect year-over-year comparability by excluding certain items, such as sales return estimates and liquidation sales. Under this new methodology, comparable-store sales in the first quarter rose 7.4 percent and included online sales, which jumped 25.7 percent. JCPenney anticipates that the new sales reporting methodology will result in a 10 to 20 basis point improvement. JCPenney obtained a committed and underwritten $2.35 billion senior-secured asset-based lending (ABL) credit facility to replace a $1.85 billion ABL bank line, which matures in April 2016. This new financing is expected to provide better pricing terms and is expected to add $500 million of incremental liquidity during peak seasonal needs. The company expects to close the facility during the second quarter. Ullman said, "With a solid plan in place to complete the turnaround, we are pleased with the support of our banking partners and their confidence in our ability to succeed."
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