JCPenney’s operations turned profitable in the third quarter, despite a dip in sales volume.
In financial filings this week, Penney’s cited progress cutting costs as well as building momentum from its “Really Big Deal” promotions featuring celebrity partnerships with Shaquille O’Neal, Gabrielle Union-Wade, Walker Hays, Martha Stewart and Jenny Martinez during Thursday night football games on Prime Video.
Operating income in the quarter ended Nov. 2 came to $2 million compared to an operating loss of $10 million in the year-ago period.
The company narrowed its net loss to $17 million, from a $30 million loss in the year-ago period.
Total net sales dipped to $1.41 billion from $1.53 billion in the year-ago quarter, though the company indicated that its Really Big Deal offers exceeded expectations for top-line sales impact.
Total costs and expenses declined to $1.5 billion from $1.6 billion in the year-ago period.
Penney’s said it made capital investments of $51 million last quarter to improve operations and the customer experience. In August 2023, Penney’s reported that it would pump more than $1 billion into its business by fiscal year 2025 to improve stores, the website, customer experiences and operational efficiencies. The company said the investment is self-funded through its own operations.
The retailer said the kids and home businesses turned in strong performances during the back-to-school season. Among the best-performing brands during the quarter were two private brands, Liz Claiborne and Stafford, as well as Adidas, Carter’s, Haggar, Levi’s and Van Heusen, according to the company.
Penney’s has endured three decades of declining performance, in recent years marked by management changes, strategy shifts and reversals, and meddling by shareholder activists and private equity owners. The retailer went bankrupt in May 2020 after getting clobbered by the pandemic and being forced to temporarily close stores. The Dallas-based retailer was lifted out of bankruptcy by two major mall owners and its new owners, the Simon Property Group Inc. and Brookfield Property Partners LP, thereby reducing its debt from around $5 billion to about $500 million.
Though many retail experts regard Penney’s as a dinosaur on the retail landscape, for Simon and Brookfield, it’s still important to the health of their shopping centers. Penney’s merchandising primarily appeals to working- and middle-class families, those segments of American society that have been most hurt by inflation and higher interest rates and struggling to make ends meet.
Penney’s has been fighting to reverse its prolonged pattern of sales declines. Among the changes in the past few years, the retailer weeded out weak private labels, differentiated the ones that matter, and added new private labels to fill merchandise voids such as Xersion for active. There’s also been a buildup in denim, casual and beauty offerings. After Sephora vacated Penney’s and set up shop at Kohl’s, Penney’s rolled out JCP Beauty departments with an inclusive mix of masstige, prestige and mass brands from new, emerging and established companies, to all of its stores.
A year ago, Penney’s sponsored the Thursday night football post-game show and saw “significant increases in consideration, awareness and positive sentiment,” the company reported earlier this year when the Really Big Deal strategy was unveiled. Penney’s expects the Really Big Deal strategy to yield more than 2 million new customers, higher shopping trip frequency and significant increases in brand awareness, the company indicated in its filing.
