Dive Brief:
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J.C. Penney’s total Q3 net sales fell 3.8% year over year to $1.36 billion. With credit card income down nearly 30% due to last year's one-time favorable accounting adjustment, total revenues fell 5.4% to just over $1.4 billion, according to financial filings Monday.
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Gross margin contracted from 38.7% a year ago to 38%, with increases in beauty, home and children’s. A markdown strategy designed to manage cost increases from distribution and tariffs drove the improvements, the company said.
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Net loss in Q3 widened 488% to $100 million. For the first nine months of the fiscal year, consolidated adjusted EBITDA rose substantially, reaching $172 million from $66 million in 2024.
Dive Insight:
J.C. Penney posted another set of declines on the top and bottom lines in Q3. But in an emailed statement, Brand CEO Michelle Wlazlo noted progress in other important measures.
In September, Shaquille O’Neal joined the retailer’s “Really Big Deals” campaign, supermodel Ashley Graham launched a new plus collection and Rebecca Minkoff debuted an affordable line exclusive to the department store. Such celebrity tie-ups will continue, per the filing.
The retailer credited its marketing efforts for a 1% trip frequency boost in September, which it said was the 18th straight month of improvement in that metric. J.C. Penney gained 20% more loyalty customers and said store traffic outpaced rivals by some 180 basis points in Q3. The best-performing categories in the period were beauty, fine jewelry and home, with activewear performing well and children’s women’s dresses, handbags and petites improving.
"We are confident we are on the right track to building a stronger JCPenney," Wlazlo said.
Penney said it remains “committed to serving as a key shopping destination for America’s diverse, working families.” Given that its target demographic is under pressure, its Q3 results were “not terrible,” according to GlobalData Managing Director Neil Saunders.
“A 3.8% sales decline certainly positions JCPenney towards the bottom of the department store league table, but it’s quite a bit better than historic numbers and suggests that the sales line might be stabilizing,” he said by email Monday. “The profit line looks shabby, but the balance sheet is relatively strong, so this is not too concerning in the short term. In this regard, and with respect to the improvements in the proposition, JCP seems to have more of a positive trajectory than a brand like Kohl’s which is still wandering in the wilderness.”
Those improvements include the “assortment being strengthened and partnerships and collaborations that are adding interest,” according to Saunders.
“Arguably, there is still a lot of work needed here to really differentiate JCP from the crowd, but a start has been made,” he said. “JCP is more exposed to a financially constrained consumer, and while its focus on value has helped offset some of the weakness, it can’t completely mitigate the fact that consumers are pulling back.”
Editor's note: This story has been updated with a statement from J.C. Penney Brand CEO Michelle Wlazlo.
