J.C. Penney delivers elusive retail success in Q4

Dive Brief:

Mid-tier department store J.C. Penney Friday reported Q4 revenue that beat expectations. Q4 sales increased 2.5% to $4 billion, driven by strong sales of home goods, footwear, handbags and its Sephora concessions.
Same-store sales in the holiday months of November and December rose 3.9%, thanks in part to strong e-commerce and success in sales of Penney's private brands. Q4 same-store sales increased 4.1%, and the retailer said that it expects 2016 same-store sales to rise 3% to 4% and that adjusted earnings would be positive.
Excluding items, the company earned $0.39 per share, beating consensus estimates from Thomson Reuters of $0.23 per share on revenue of $3.99 billion.

Dive Insight:

J.C. Penney seems to be achieving what is slipping by the likes of Kohl’s, Sears and Macy’s: strong sales of apparel and accessories. The retailer also is balancing its need for cost-cutting with continued investments in mobile, omni-channel, supply chain and merchandise.

In a conference call with analysts Friday morning, J.C. Penney CEO Marvin Ellison noted that the retailer had a strong Black Friday, saying that boots, small electronics, fine jewelry, athletic wear and Sephora did especially well during the holiday period. He added that its handbag category is resonating with shoppers.

In the conference call, Ellison said that nimble logistics (something he was known for in his previous position at Home Depot) were challenged but not overwhelmed by warm weather during the holiday season—a notable departure from complaints found in many other recent retail earnings reports.

Looking ahead, J.C. Penney said it would expand its menswear collection from former football star Michael Strahan and its millennial-focused apparel brand Belle + Sky, while increasing its number of Sephora concessions in more stores.

The results show that J.C. Penney’s turnaround is gaining momentum under new CEO Ellison, who in the conference call and in his statement called out store associates as key to the retailer’s success.

"We are very pleased with our performance for the fourth quarter and full year,” Ellison said in the statement. “Our focus on private brands, omnichannel and revenue per customer is clearly resonating as we continue to win market share in a competitive environment. We are also pleased that we delivered strong fourth quarter results while effectively managing our inventory, which finished the year up 2.6 %. I would like to thank our over 100,000 associates who embrace our strategy and come to work each day focused on driving sales and providing excellent customer service."