Sales pick up at JC Penney in key holiday period

NEW YORK (AP) -- The first quarterly increase in 2 years for comparable-store sales at J.C. Penney was not enough to win over Wall Street, which punished the retailer's shares Tuesday.

The company's stock plunged almost 8 percent to an all-time low in midday trading after a brief lift from the report.

Same-store sales rose 2 percent during the November-January quarter, which was less than the 4.2 percent increase that analysts had expected, according to FactSet estimates.

It was not enough to erase from investor's minds a 31.7 percent plunge in same-store sales from the same period last year either in a quarter that capped a disastrous first year under former CEO Ron Johnson.

During the nine-week holiday period in November and December, same-store sales rose 3.1 percent.

The holiday season can account for 20 percent to 40 percent of a retailer's annual sales.

Same-store sales are considered a key measure of a retailer's heath because the metric strips away the volatility associated with stores that have recently opened or closed.

It was a brutal holiday season not only for J.C. Penney, but for almost the entire retail sector.

The slow economic recovery, a stubbornly high unemployment rate and fierce competition from online retailers like Amazon.com forced traditional retailers to discount heavily just to get people through the door.

Heavy winter storms raking the United States in January have now cut into store traffic and weighed on post-holiday sales.

Major retailers have cut their profit outlooks, including Wal-Mart Stores Inc. on Friday. The world's largest retailer said that its comparable-store sales for the fourth quarter, which includes the crucial holiday season, will be lower than it had expected.

But J.C. Penney does not have anywhere near the room to maneuver that Wal-Mart and other major retailers have.

Repeatedly, the rate at which J.C. Penney burns through cash has led to a large exodus by investors.

On Tuesday, the company said that it ended 2013 with more than $2 billion in total available liquidity. That was in line with most estimates, but far from healthy for a company that recently posted its seventh consecutive quarter of big losses.

"We believe (J.C. Penney) could run into another liquidity situation by 3Q14," wrote Sterne Agee's Charles Grom. "The bottom line is that J.C. Penney's sales trend need to improve materially better ... and quickly."

Earlier this month, the company announced thousands of jobs cuts and the closure of dozens of stores.

Johnson was ousted last April after 17 months on the job and the company has brought back Mike Ullman as CEO.

Ullman is trying to win back shoppers by restoring the sales events and basic merchandise ditched by Johnson, who was trying to target younger, wealthier consumers.

"While 2013 brought a lot of change and challenges to J.C. Penney, the steady improvements in our business show that the company's turnaround is on track," said Ullman.

For analysts who follow the company, the smaller-than-expected sales increase was at best a goal postponed during a rough time for retailers.

"Under the circumstances, it is progress," said Bernard Sosnick, a retail analyst at Gilford Securities. "I thought the holiday season would be a really significant turning point (for Penney), but it may be spring."

In Tuesday trading, the stock fell 45 cents to $5.23.

It's not clear how much the holiday sales gains, amid discounts at Penney, came at the expense of profits. Investors will find out when the company reports its final fourth-quarter results, on Feb. 26.

Penney's most recent monthly sales figures have shown some improvement after a long decline. Sales at stores open at least a year edged up 0.9 percent in October, the first monthly increase since December 2011. The metric jumped 10.1 percent in November.

But the company has not broken out December sales, saying only that it was "pleased with its performance for the holiday period."

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