J.C. Penney Reports a Strong Quarter on Solid Sales Growth

J.C. Penney Co. posted a better-than-expected 22% rise in fiscal first-quarter earnings Thursday, crediting strong sales of fine jewelry and shoes and a private-label business that helped drive profit margins higher.

The Plano, Texas-based retailer raised its full-year earnings outlook by 2 cents a share, but the forecast still fell short of Wall Street targets. Shares of Penney fell 93 cents, or 1.4%, to $65.98. They have risen 19% year to date.

“It looks like the results were good, but the forecast was a little bit light,” said Thomas Leritz, a portfolio manager with Argent Capital Management, which owns stock in Penney.

Penney, which is working to change its image from that of a frumpy department store to a fashionable retailer, reported net income of $210 million, or 89 cents a share, for its fiscal first quarter ended April 29, compared with $172 million, or 63 cents, a year earlier.

The retailer reported earnings per share from continuing operations of 90 cents, compared with 62 cents a year earlier. Analysts, on average, expected Penney to earn 88 cents a share, according to Reuters Estimates.

Penney has wrapped up a five-year turnaround plan and is now focused on attracting customers with up-to-date merchandise. It is expanding its private and exclusive brand offerings, such as Nicole by Nicole Miller and home furnishings by designer Chris Madden, and has outlined a plan for opening new stores.

The company, which operates 1,021 department stores in the United States, said quarterly sales increased to $4.22 billion from $4.12 billion. Analysts were expecting sales of $4.24 billion.

Same-store sales -- a key gauge that measures sales at stores open at least a year -- rose 1.3%. The company said its strongest regions were the Southeast and West.

On a conference call with analysts, executives said that women’s apparel sales continued to be soft and that the company was taking aggressive action with markdowns to keep inventory fresh. Penney also said it was launching new brands, such as East 5th, to try to bolster women’s clothing sales.

Taking into account the first-quarter results, the company said it expected full-year earnings from continuing operations of $4.24 to $4.34 a share, up from a forecast of $4.22 to $4.32 it outlined May 4. Analysts, on average, now forecast full-year earnings per share of $4.35, excluding items, up from their $4.26 estimate earlier this month.

Also Thursday, Penney rival Kohl’s Corp. said fiscal first-quarter profit rose 34%, boosted by improved profit margins and strong sales, and its shares rose in after-hours trade.

The retailer, which operates 749 stores, has been introducing new and exclusive brands to bolster profit. It reported net income of $167.2 million, or 48 cents a share, for the quarter ended April 29, compared with $124.7 million, or 36 cents, a year earlier.

Kohl’s, based in Menomonee Falls, Wis., said revenue rose 16% to $3.2 billion.