Selling more stuff for more money is a pretty good way to run a business. So you might be surprised that it's just what J.C. Penney (NYSE:JCP) did in its last quarter. The company grew comparable-store sales, grew total sales, and widened its gross margin. It still put up a loss for the quarter, but things look much more positive for this beleaguered brand. The market thinks so, too, and the stock jumped over 15% in early trading after the earnings report.
The man behind the brand
If you want to credit someone for J.C. Penney's success, you don't need to look any further than CEO Myron Ullman. The former J.C. Penney chief came back to the company after the April 2013 ousting of Ron Johnson, and he has brought back much of what customers thought was missing under his predecessor. That included regular sales, a layout based less on individual brands, and a more welcoming environment for shoppers. In addition to returning to the company's core brand image, Ullman has also worked to refresh J.C. Penney's tired stores and image.
To do that, Ullman has laid out a three-phase plan. Steps one and two have already happened -- stabilization and rebuilding. Ullman removed the team that Johnson had built and changed the company's strategy, ditching most of the transformative plans that Johnson had put in place. It makes sense that things would change, as after Johnson had his way, J.C. Penney ended up in a downward spiral, headed toward a potential death. Sales were falling quarter after quarter, and competitors were sweeping up disgruntled customers.
This time last year, Macy's put up a 3.8% increase in comparable-store sales against J.C. Penney's 16.6% drop. With J.C. Penney's rebuilding plan under way, the tables have turned, and now Macy's is seeing declining comparable sales. Customers are rediscovering J.C. Penney.
The final step for Ullman is to take J.C. Penney into a focus on long-term growth.
J.C. Penney in the long run
Talking about J.C. Penney's long-term plans, Ullman said during an earnings conference call that the retailer is "focused on refining [its] merchandizing and marketing strategies, in order to steadily grow sales and significantly improve gross margins." This is where the rubber hits the road and investors find out if Ullman can make J.C. Penney into a new, better business.
The company's biggest long-term problem is that J.C Penney is a mall-based company. As sales move increasingly online and mall traffic dries up, J.C. Penney needs to shift in order to keep itself afloat. The company's current move is to push for more online sales. Ullman sees that: In the last quarter, online sales rose 25.7% compared to the same period in the previous year.
Ullman has worked to bring J.C. Penney's online and physical stores more in line with each other. In November he said, "The success of JCP.com reflects the reintegration of store and online buying, planning, and allocation." When he first came back to the company, Ullman said that there was "little synergy between stores and online" -- a situation he's worked to improve.
That seems like a sign that Ullman's head and strategy are in the right place. This company still has a long way to go, but it's clearly making the right moves. There are very few people who thought J.C. Penney could bounce back from the Johnson reign, and I wasn't one of them. However, Ullman has convinced me that he knows what his customers need and that he can give it to them while still making money. I'm excited to see how his plan plays out.
Andrew Marder has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.