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 But the company's shares dropped as much as 18 percent on Friday,
highlighting growing concerns about consumer spending.
Data on Friday showed that U.S. retail sales rose just 0.1 percent
in October, less than expected, suggesting a slowdown in consumer
spending that could dampen expectations of a strong pickup in
economic growth in the quarter.
Deutsche Bank analyst Paul Trussell summed up J.C. Penney's quarter
as "good results, but bad timing."
Penney's results capped a volatile week for U.S. department stores
ahead of the all-important holiday shopping season, a period that
historically has accounted for about a third of their annual sales
and almost 40 percent of earnings.
Macy's Inc <M.N> and Nordstrom Inc <JWN.N>, whose customers tend to
be more affluent than Penney's, both cut their full-year forecasts
this week after reporting disappointing results.
However, Kohl's Corp <KSS.N>, which competes more closely for the
same shoppers as Penney, reported better-than-expected profit and
sales.
Penney maintained its same-store sales forecast for the year despite
reporting on Wednesday that its comparable store sales in the
quarter were the best in over nine years.
J.C. Penney's gross margin rose by 70 basis points to 37.3 percent,
helped by improved clearance and promotional selling margins as well
as supply chain efficiencies.
NET LOSS NARROWS
Analysts applauded the results.
"While the retail backdrop has deteriorated rapidly over the past
few months, Penney’s low cost, private brand focus could position
the company in a sweet spot in 2016 should the consumer continue to
retreat," Sterne Agee CRT analyst Charles Grom said.
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Penney, which last reported a profit in the final quarter of 2013,
said its net loss narrowed to $137 million, or 45 cents per share,
in the third quarter ended Oct. 31, from $188 million, or 62 cents
per share, a year earlier.
Excluding items, the company lost 47 cents per share, compared with
the average estimate of 55 cents, according to Thomson Reuters
I/B/E/S.
Net sales rose a better-than-expected 4.8 percent to $2.90 billion,
helped in part by Sephora, which Chief Executive Marvin Ellison said
had performed "exceedingly well."
Sephora, which is popular among "millennials", is owned by luxury
giant LVMH <LVMH.PA>.
Analysts had expected sales of $2.88 billion.
Penney said earlier this week that its same-store sales in the
quarter rose a more-than-expected 6.4 percent.
Up to Thursday's close of $8.79, Penney's stock had risen more than
35 percent this year. The stock was trading at $7.75 at midday.
(Reporting by Sruthi Ramakrishnan and Siddharth Cavale in Bengaluru;
Editing by Savio D'Souza and Ted Kerr)
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