Maybe Ron Johnson didn’t kill JCPenney, after all.
The struggling retailer’s shares soared 25 percent in after-hours trades on better-than-expected sales, a key sign that Penney may be recovering at last from former CEO Johnson’s disastrous makeover attempt.
“We’ve turned an important corner,” said CEO Mike Ullman, who retook the reins 13 months ago from Johnson, an ex-Apple exec who had sent shoppers fleeing by abruptly banishing coupons and sales events.
Indeed, Penney in April saw its first increase in customer traffic in 30 months — a signal that Ullman’s strategy to bring back old-school department-store discounting is finally beginning to work.
Sales at stores open at least a year, or same-store sales, rose 6.2 percent during the first quarter, beating the company’s forecast for an increase between 3 percent and 5 percent.
Penney shares, 30 percent of which have been “shorted” by investors who have borrowed them on a bet that they will fall, traded as high as $10.51 in after-hours trades after closing the regular session at $8.37.
Ullman — who along with other top execs has lately been buying Penney shares — signaled that he’s not going anywhere despite the fact that the board hired an executive-search firm last year to replace him.
“We’re fully staffed at the senior level,” Ullman told analysts on a Thursday call. He added that there are “no major changes on the horizon.”
Ullman said he expects Penney to stop losing money this year, citing solid momentum heading into the current quarter. The company reiterated that it anticipates same-store sales gains in the mid-single-digits for the full year.
Nevertheless, the most recent numbers remained sobering: Penney’s net loss was $352 million, or $1.15 per share, compared with a loss of $348 million, or $1.58 per share, a year earlier.
That’s a signal that Penney is still being forced to mark down unsold clothing to entice wary shoppers alienated by Johnson’s tactics.
In addition to restoring coupons, Ullman has brought back a number of private brands that Johnson had banished. Those include St. John’s Bay, a $1 billion brand that Johnson said was dowdy and out of date.
Some critics are skeptical about whether bringing back old brands can make Penney anything better than mediocre. Still, a recent jump in sales eases fears that Penney could face another liquidity crisis later this year.
Total sales rose to $2.8 billion, from $2.64 billion, beating Wall Street’s forecast of $2.71 billion.
Gross margins continued to improve, to 33.1 percent of sales, from 30.8 percent in the same quarter of 2013.
The company said it had increased its credit facility to $2.35 billion, from $1.85 billion, and extended its maturity to enhance its liquidity position.