J.C. Penney Rises as Wall Street Buys Into Turnaround Strategy

PLANO, United States — J.C. Penney surged 25 percent as the retailer announced plans to close 15 more locations and chief executive Jill Soltau said the department-store chain "has the capacity to deliver improved results." The company also announced a trio of new executives.

Comparable sales, closely watched measure in the retail sector, fell 6 percent in the critical fourth quarter on an unshifted basis, missing analysts’ expectations for a 4.7 percent drop, according to Consensus Metrix. The direction wasn’t a surprise: The company had already pre-reported that the Christmas period was a tough one. Profit, however, did exceed analysts’ expectations and the company predicts it will have a positive free cash flow this year.

The store closures are one of the first major moves by Soltau, who took the helm in October. She said she’d be taking a close look at the company’s network of about 860 sites, and already named three locations in January slated for the chopping block. She also hired Michelle Wlazlo, who most recently worked at Target, as chief merchant.

Soltau said the company “has already taken meaningful steps to drive improvement in key businesses” such as women’s apparel and jewellery. The company has also eliminated low-margin product categories, she said. Improving the retailer’s inventory mix was seen as a key challenge when Soltau came on board.

The results reiterate the idea that not every retailer had the upbeat Christmas season analysts had been expecting. While Walmart had its best holiday quarter in at least a decade and Best Buy delivered sales that outpaced projections, J.C. Penney’s revenues of $3.67 billion were just short of analysts’ average estimate.

The shares jumped as much as 25 percent to $1.55 in early trading after the announcement. The stock was up 19 percent through Wednesday’s close.

By Jordyn Holman with assistance from Eric Pfanner; editors: Anne Riley Moffat and Jonathan Roeder.