Penney’s showing signs of life

Associated Press file photo -- A shopper browses school uniforms at a J.C. Penney in New York. The struggling chain, though posting another loss, could be turning the corner on its troubles.
Associated Press file photo -- A shopper browses school uniforms at a J.C. Penney in New York. The struggling chain, though posting another loss, could be turning the corner on its troubles.

Investors show confidence in stabilization by bumping shares 6%

The worst may be over at J.C. Penney Co.

The beleaguered department store chain on Tuesday reported its sixth straight quarter of big losses and steep revenue drops as it continued to face challenges related to a botched turnaround plan spearheaded by its ousted CEO Ron Johnson.

But investors sent Penney shares up 6 percent to more than $14 — after having pushed the stock down nearly 70 percent in the last 18 months — in an expression of confidence that returning CEO Mike Ullman has started to stabilize the business.

Since he retook the top job in April after having occupied it from 2004 to 2011, Ullman has been bringing back coupons, frequent sales events and basic merchandise like khakis and jeans that Johnson eliminated in a failed attempt to attract hipper, more affluent shoppers.

The latest report offered some encouraging signs that the move is beginning to pay off.

Revenue improved from month-to-month during the second quarter, and the decline in Penney’s online business slowed significantly in part due to the company’s move to veer from Johnson’s strategy and go back to operating its online businesses with its physical stores in lockstep.

The chain also said it is seeing an encouraging start to the back-to-school season, the second-largest selling period behind the winter holidays.

Bernard Sosnick, a retail analyst at Gilford Securities, said based on the results, he expects Penney to get back to profitability by the fourth quarter.

He also said he wouldn’t be surprised if during the first half of next year, the chain posted sales increases of 10 percent to 15 percent.

“There is light at the end of the tunnel,” Sosnick said. Paul Swinand, a retail analyst at Morning Star, agreed, saying Penney “is showing some signs that it’s turning the corner.”

Penney’s Ullman, however, took a more cautiously optimistic tone in his call with investors on Tuesday.

He wouldn’t promise that Penney would see a revenue gain in the current quarter, noting that August, the first month of the third quarter, will be difficult since business is being compared with a year ago when Penney drove customers in with free haircuts.

He also cited a challenging economic environment that has tripped up other retailers, including Wal-Mart Stores Inc., the world’s largest retailer, and Macy’s Inc., in the latest quarter.

Both chains last week released bleaker outlooks for the year.

“As you can see in our results for the quarter, we aren’t where we need to be yet,” Ullman said.

“This is, however, a journey. There are no quick fixes to correct the errors of the past. It is going to take time to get fully back on the right track across the company.”