In August, the beleaguered department store 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 six percent to nearly $14 - after having pushed the stock down almost 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 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.
The chain also said it is seeing 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."
Penny's Ullman, however, took a more cautiously optimistic tone. 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 a string of retailers, including Wal-Mart Stores Inc. and Macy's Inc., in the latest quarter. Both 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," he 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."
Indeed, Penney has a lot of work left to do. In the three-month period that ended Aug. 3, Penney lost $586 million, or $2.66 per share. That compares with a loss of $147 million, or 67 cents per share, a year earlier.
- The Associated Press
"The episode from hell is over, and Penney has deeper problems than ever before - but we believe it still retains the goodwill of its core shoppers and that they will return and shop more frequently as assortments of traditional lines are rebuilt," he said.
Penney shares rose nearly 6 percent, or 77 cents, to $13.99 in early afternoon trading. Before Tuesday, shares have been down nearly 70 percent in value since February 2012 when investors pushed up shares to $43 on optimism over Johnson's plan.
- The Associated Press
Costco Wholesale Corp. also was among the retailers that posted a revenue increase in June. The wholesale-club operator said revenue at stores open at least a year climbed 6 percent, topping Wall Street's expectations. Analysts surveyed by Thomson ReGranger said. "We're starting over like 18-year-olds."
"Retailers are going to be quite promotional," said Madison Riley, managing director at Kurt Salmon ]]>