JC Penney shares were up as much as 16% in early trading after the retailer reported sales that beat estimates.
Same-store sales climbed 6.2%, compared with forecasts for 4.2%. Net sales came in at $US2.8 billion compared with expectations for $US2.7 billion. Gross margin for the quarter came in at 33.1%, in line with expectations. Loss per share came in at $US1.16, which was narrower than the $US1.25 loss expected by analysts. The company announced it had received a new, larger credit line.
Sterne Agee’s Ray Young says it’s the first time in 30 months Penney reported positive same-store sales growth in April, and that some of it may have been driven up by Easter. But he offered four reasons for remaining bullish:
1) the absolute comp of 6.2% was better than our model (+2.0) and a touch higher than buy-side real expectations of ~4.0% — favourably the trend improved throughout the quarter — echoing sentiment we have heard from most department stores (by category women’s/men’s apparel, home, and fine jewelry were called out); (2) we were impressed that JCP was able to reduce inventory levels, which were up only 1.3% at the end of the quarter versus the company’s sales increase of 6.3%; (3) SG&A expenses remain well controlled, down significantly YOY, fueling much of the aforementioned EPS beat; and (4) JCPenney reiterated its $US2.0B liquidity outlook for year end and replaced its existing $US1.85B ABL Bank Line with a new $US2.35B senior secured ABL credit facility. (The program is constrained by the borrowing base; i.e. when inventory levels are lowest; JCP will not be able to tap the entire amount.)
Shares were trading as high as $US9.75.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.