It was expected to be batten-down-the-hatches time again for shareholders of struggling retailer J.C. Penney (NYSE:JCP) this morning, but despite a widening loss many aspects of Penney's business are showing signs of stabilizing. Shares were up more than 7% as of 12:45 p.m.
For the third quarter, Penney delivered a 5.1% decline in revenue to $2.78 billion as comparable-store sales dipped 4.8% from the year-ago period. By comparison, though, this was a 710-basis-point improvement from its second-quarter same-store sales comps, and it reported its first month-over-month improvement -- a 0.9% same-store sales jump in October -- since December 2011. Helping stabilize sales, according to CEO Mike Ullman, were its men's and women's apparel divisions, as well as fine jewelry.
Net loss, however, widened nearly fourfold to an adjusted $489 million, or $1.81 per share, from a loss of just $123 million in the previous year. In order to get consumers back in its stores, it's needed to return to its old discounting ways, and, as such, has deeply discounted excess inventory to clean up its balance sheet. The end result is a 300-basis-point dive in gross margin to 29.5%, but an improving sales and traffic outlook.
Penney's ended the quarter with $1.23 billion in cash and cash equivalents and total available liquidity of $1.71 billion compared to $5.61 billion in debt. Operating cash outflow was $737 million during the quarter, reflecting larger inventory purchases for Christmas, as well as the $489 million net loss.
Looking ahead, Ullman sees fourth-quarter same-store comps and gross margin improving year-over-year and anticipates Penney's available liquidity should improve over the $2 billion threshold by quarter's end.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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