NEW YORK (TheStreet) -- J.C. Penney (JCP - Get Report) could positively surprise Wall Street once again when it announces second-quarter earnings and third-quarter guidance on Aug. 14 after the close.
If it does, CEO Mike Ullman and his team will gain a good bit of support in the investment community.
Department stores reported disappointing earnings during the first quarter thanks to bad weather. According to data compiled by Bloomberg, four of six department stores with a $2 billion market cap or greater met lowered Wall Street earnings expectations -- only Sears (SHLD - Get Report) and Kohl’s (KSS - Get Report) fell shy. On average, first-quarter gross profit margins for the sector declined 40 basis points year over year, as compiled by Bloomberg. Even Macy’s (M - Get Report), long viewed as the industry's best operator, notched a 1.6% same-store sales decline in the quarter, though it reaffirmed its fiscal year earnings per share guidance of $4.40 to $4.50.
Looking ahead, we anticipate further gross margin expansion in the second quarter. ... Our conversion rates when they are in the store have been consistently positive for the last two or three months. So we feel that we do have a sustainable trend and we do have a lot of analytics to back it up.Ed Record, Chief Financial Officer
Store traffic improved sequentially versus the fourth quarter of last year, and was positive during the month of April, as well as during key promotional and holiday periods. April represents the first time in over 30 months our store traffic was positive. ... Our store conversion average transaction size and units per transaction for the quarter were all up significantly versus last year. In addition, our average unit retail was up low single-digits.Identifying What’s Happening at J.C. Penney This self-produced Vine video shows what was likely driving J.C. Penney throughout the second quarter: more merchandise selling at promotional prices and fewer racks labeled with red clearance signs, which could be beneficial for J.C. Penney’s profit margins as it was in the first quarter.
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