Sephora can't save JCPenney in Q2

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Sephora can't save JCPenney in Q2

By Gina Acosta - 08/11/2017

JCPenney opened 32 more Sephora locations in the second quarter, but that wasn't enough to grow same store sales.

The retailer said same store sales declined 1.3% in the second quarter ended July 29.

"We are pleased to deliver a top line sales increase of 1.5 % and quarterly sequential improvement of 220 basis points in our comp sales performance in go forward stores," Marvin R. Ellison, chairman and chief executive officer, said. "While broader retail remains challenged, we are encouraged by the improved performance in our total apparel business, including a significant acceleration in kids' apparel.  Nearly all categories delivered improved sales results during the quarter, with our growth initiatives in beauty, home refresh and omnichannel continuing to deliver positive sales growth."

The company's net loss widened to $62 million, or 20 cents per share, in the second quarter ended July 29, from $56 million, or 18 cents per share, a year earlier.
Net sales rose 1.5 percent to $2.96 billion. 

"During the second quarter, we liquidated inventory in 127 of our closing stores which had a negative impact on gross margin and EPS. These events were isolated to the second quarter," Ellison said. "As such, we are reaffirming our EPS guidance for the year, and remain confident in our ability to further strengthen our balance sheet, while driving sustainable growth and long-term profitability for JCPenney. To that end, we are pleased that we are off to a strong start in August for the all-important back to school season.  We are excited by this momentum and expect to deliver improved results in the back half of the year."

Home, Fine Jewelry, Footwear and Handbags, Sephora and Salon were the Company's top performing divisions during the quarter. Geographically, the Southwest and Southeast were the best performing regions of the country.  During the second quarter, Penney's opened 32 new Sephora locations within its stores and completed 31 Sephora expansions. By the end of the year, the department store plans to have 650 Sephora stores, which will be in about 75 percent of Penney's existing boxes.

Ellison also said during the analyst call that JCPenney expects many retailers to ramp up promotions and discounts to try and lure shoppers into their stores. The CEO warned these sales may be even more aggressive than “what we’ve traditionally seen.” Ellison expressed confidence that JCPenney won’t have to cut its earnings guidance as a result of tougher competition from its rivals.