J.C. Penney to Report Better Than Expected Q2 Comps, Analyst Predicts

NEW YORK (TheStreet) -- J. C. Penney (JCP) is scheduled to report second quarter earnings after the market close on Thursday, August 14, with a conference call scheduled for 4:30 pm ET. J.C. Penney operates about 1,100 retail stores and jcp.com.

EXPECTATIONS: Analysts are looking for a loss per share of (93c) on revenue of $2.79B, according to First Call. The consensus range for EPS is ($1.13)-(65c) on revenue of $2.71B-$2.86B.

LAST QUARTER: J. C. Penney reported first quarter EPS of ($1.16), against estimates for ($1.25), on revenue of $2.8B, against estimates for $2.71B. Comparable store sales increased 6.2% for the quarter. The retailer forecast Q2 same-store sales up in the mid single digits and said the gross margin would improve sequentially against the prior year period. For fiscal year 2014, J.C. Penney forecast same-store sales up in the mid-single digits with gross margin up "significantly" versus the prior year. On its Q1 earnings conference call, the company said that it expected to be cash flow neutral this year and that it sees working capital as a source of funds in 2014.

NEWS: Shopper visits to physical stores, not specifically J.C. Penney but all U.S retailers, fell by nearly 7% in June and nearly 5% in July, according to data firm ShopperTrak, reported The Wall Street Journal. The report noted that physical store visits have fallen by 5% or more from a year earlier in every month for the past two years in the U.S. The WSJ also reported that Mindy Grossman, CEO of HSN (HSNI), was considered the lead candidate for J.C. Penney Chief Executive Officer Myron Ullman's position. Grossman had been in talks with J.C. Penney but could not agree on terms and negotiations broke down "months" ago, the Journal added in its July 13 report. During the quarter, J.C. Penney appealed a New York state court decision that ruled the company interfered with a contract between Macy's (M) and Martha Stewart (MSO) by selling the celebrity's home products.

STREET RESEARCH: Craig-Hallum upgraded J.C. Penney shares to Hold from Sell earlier this week. The research firm expects the Q2 report to reflect better than expected comps from a stronger inventory position and improving vacancy rates in its malls, but remains cautious longer-term given gross margin pressures from outsized e-commerce growth. Piper Jaffray believes a turnaround is "very much underway" at the retailer and says the company is on a path to reclaim $2B-$3B of its $6B revenue loss following a change in management. The firm sees positive comps in Q2 and the second half of 2014, it stated in a report published July 31.

PRICE ACTION: Since the day after its last earnings report, J. C. Penney shares are up about 12.5%. In morning trading today ahead of tonight's Q2 report, J. C. Penney's stock is up 0.5% to $9.40.

Reporting by Laurie Pasternack Chan.

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