News

In reversal of fortunes, JC Penney posts strong holiday sales while retail star Macy's slumps

NEW YORK, N.Y. – Talk about a comeback.

J.C. Penney reported a 3.9 per cent increase in comparable-store sales during the holiday.

It was a reversal of fortunes this crucial selling season, with the usually resilient Macy’s reporting late Wednesday that sales in stores open at least a year slumped 5.2 per cent between November and December. Macy’s is now cutting up to 4,800 jobs, reorganizing operations and closing 40 stores. It also slashed its profit outlook.

Macy’s estimated that 80 per cent of its decline was weather-related. J.C. Penney said warm weather did cut into clothing sales but there were other strong sellers that offset that weakness.

Gap reported sales for December that showed its continued struggles. The San Francisco-based chain, which operates stores under its namesake, Old Navy and Banana Republic, registered a 5 per cent drop in revenue at stores opened at least a year. The declines were across all divisions, including Old Navy, which has recently been a bright spot for the company.

Marvin Ellison, who took over as J.C. Penney CEO last August, said that the company strived to improve its online business. It now has 250 stores that are helping to fulfil online orders as it plays catch up to other retailers. It also focused on store-label brands and improved its selection of gifts for the holidays.

Those were strong numbers for the Plano, Texas retailer, which is nearly three years into a turnaround effort following a disastrous attempt to reinvent the brand under former Apple executive Ron Johnson. The changes put into place under Johnson resulted in massive losses and plummeting sales.

Still, J.C. Penney has a long way to go before it can claim a full recovery. The company is expected to post annual revenue of $12.6 billion for this fiscal year, up nearly 3 per cent from the previous year. That’s remains far from the nearly $18 billion in annual revenue the company once booked.

Macy’s had been a stellar performer since the recession, but over the past year or so has seen its sales growth slow. Profits are under pressure because of investments in new businesses and discounts the retailer has been forced to offer because of weak sales.

The Cincinnati company has blamed its woes on a shift in consumer spending, with Americans dishing out more money on nights out or vacations, and less on clothes.

Among other retailers that reported holiday sales was Signet Jewelers Ltd., which reported that comparable-store sales rose 4.9 per cent for the eight-week period ended Dec. 26. That compared with an increase of 3.6 per cent in the prior year.

Ken Perkins, president of Retail Metrics, a research firm, said that despite positive results from some stores, he’s still cautious about the fourth-quarter for retailers. He now expects quarterly profits to rise 0.1 per cent, down from growth of 5 per cent three months ago, as more retailers are forced to slash prices.

“While sales may look good, it came at the expense of margins,” he said.

J.C. Penney, Macy’s and other major retailers report fourth-quarter results next month.

J.C. Penney’s shares rose 26 cents, or nearly 4 per cent, to $7.26 Thursday. Its shares have fallen 8 per cent over the past year. Macy’s shares got a bump Thursday, rising more than 2 per cent, or 74 cents, to $36.89. Macy’s shares have fallen more than 40 per cent in the past 12 months. And Signet Jewelers shares rose nearly 5 per cent to $133.28.

Gap’s shares fell more than 8 per cent, or $2.22, to $24.52 in after-hours trading when the news was announced. During regular markets, Gap’s shares rose nearly 6 per cent, or $1.45, to $26.74. Shares are down nearly 40 per cent over the past 12 months.