Things are finally looking up for J.C. Penney (NYSE: JCP). The struggling retailer posted its first quarterly profit in more than two years along with a gain in same-store sales. Compared to the massive loss a year earlier, Penney is on the path to recovery.
J.C. Penney reported a net income of $35 million in the quarter that ended Feb. 1, compared with a loss of $552 million a year earlier. The company's last quarterly profit was in the quarter ended July 2011.
Total sales fell 2.6 percent to $3.78 billion, although same-store sales rose 2 percent, the first gain since the quarter that ended April 2011. For the full year, total sales decreased 8.7 percent, and same-store sales decreased 7.4 percent. Gross margin widened to 28.4 percent from 23.8 percent, but was still negatively affected by vast clearance markdowns taken late in the quarter.
Those numbers were better than many expected, and sent JCP shares up by as much as 14 percent in after-hours trading Wednesday.
Looking ahead, J.C. Penney projected same-store sales will rise 3 percent to 5 percent in the fiscal first quarter. Gross margins are expected to continue improving year-over-year, while expenses are seen declining slightly.
J.C. Penney CEO Mike Ullman is still cleaning up the mess left by former CEO Ron Johnson, who led the chain into a steep decline by introducing trendier brands and steering the company away from coupons and sales events. The disastrous results left the company with a huge sales deficit.
Ullman said Wednesday during an earnings call that he expects J.C. Penney to complete its turnaround in 2014, boldly brushing off recent worries on Wall Street that the retailer is at risk of going bankrupt this year.
"The most challenging parts of the turnaround are behind us," Ullman said, adding that J.C. Penney is heading into the final phase of its turnaround. The first two phases included firming up relationships with suppliers, stabilizing the brand and rebuilding its management, adding it was important to "restore calm and clarity of purpose." Phase three includes reviewing merchandising and marketing strategies to maintain momentum on gross margin gains, draw in more shoppers and continue boosting sales.
-See this J.C. Penney earnings report
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