J.C. Penney soars as CEO says turnaround plan gaining steam

Bloomberg photo by Dylan Hollingsworth

Jill Soltau, chief executive officer of JC Penney, during a Sept. 11 interview in Fort Worth, Texas.

J.C. Penney Co. shares surged after the company raised its profit forecast, even amid another quarterly sales decline, as the battered department-store chain's turnaround plan gains more time to play out.

Excluding some items, earnings before interest, taxes, depreciation and amortization will exceed $475 million this year, up from a previous forecast of between $440 million and $475 million. The chain also posted a drop in inventory in the third quarter, a sign its struggles with buildups of unpopular merchandise is easing. For more on the results, click here.

J.C. Penney's report shows it's making progress in improving its operations, and that cheered investors. "We are beginning to see results -- both in our numbers and how we operate as a business," Chief Executive Officer Jill Soltau said in a statement.

Still, same-store sales, a key retail metric, fell 9.3% last quarter. That's worse than the average projection for a decline of 8.3%, according to Consensus Metrix. With foot traffic falling and five straight drops in comparable sales, the chain is testing new store formats and in-store experiences. New Commerce Department figures show U.S. retail sales rebounded in October, though categories including clothing and furniture posted declines.

This holiday season is especially critical for the retailer, and Soltau said on a conference call that "it really is the first step of us connecting differently with our customers." Among new features is its partnership with the Hallmark channel, which runs holiday-related programming, and Santa photo ops at its in-store portrait studios.

Soltau also said the company has no plans to alter the number of stores in its fleet. With a number of retailers across the industry paring back locations, investors are paying close attention to decisions regarding store counts.

The retailer reported liquidity of about $1.7 billion for the quarter, and reaffirmed its expectation for $1.5 billion of liquidity at the end of the year.

The shares jumped as much as 12% in New York Friday, the biggest intraday gain in more than a month. The stock had gained 5.8% this year through Thursday's close.

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