J.C. Penney

(JCP) - Get Report

boosted second-quarter earnings guidance and rolled out a plan to shore up its balance sheet.

The company said July sales beat its expectations by rising 8.1% in stores open at least a year. Penney boosted its second-quarter continuing operations earnings outlook to around 22 cents a share, which is well north of the 13-cent Thomson First Call analyst consensus estimate. The company cited strong gains at its Internet operation and improvements in profit margins.

The news came a day after the Plano, Texas, department store chain completed the sale of its Eckerd drug store unit for $4.5 billion. Penney said it would use $3.5 billion in net proceeds from that deal, along with $1.1 billion in existing cash, to buy back stock and retire debt.

Penney said it would buy back $3 billion in stock over the next year in a move that could slash its diluted share count by 23%. The company also aims to retire $2.3 billion in debt. Penney said those moves, along with the elimination of $3.4 billion in lease obligations tied to the now-departed Eckerd unit, would improve its balance sheet to the tune of $8 billion.

"The repositioning of J.C. Penney's capital structure demonstrates our financial strength and significantly enhances our credit profile," finance chief Robert Cavanaugh said. "This program, coupled with the strong sales and earnings trends seen in the first half of the year, moves us one step closer to restoring the company to investment-grade credit ratings."

On Monday, Penney shares slipped 7 cents to $39.93.