LDN - Business

J.C. Penney tie-up favorable for Sephora business - LVMH

[July 25, 2019] PARIS (Reuters) - U.S. sales at beauty retailer Sephora picked up in the second quarter after a sluggish end to 2018, its parent LVMH <LVMH.PA> said on Wednesday, citing its continued tie-up with U.S. department store J.C. Penney <JCP.N>.

The 117-year-old money-losing chain, based in Plano, Texas and which has rolled out hundreds of Sephora shops within its stores across the United States, hired advisers to explore debt restructuring options, Reuters reported last week.

J.C. Penney Co Inc said in a statement it had no significant near-term debt maturities and was not preparing for bankruptcy.

It described working with advisers as "taking positive and proactive measures, as we have done in the past, to improve our capital structure and the long-term health of our balance sheet," and said the company maintained a "strong liquidity position."

LVMH, a French luxury goods conglomerate that also owns fashion brands like Christian Dior, declined to comment on J.C. Penney's broader situation.

"We're not in all the (JCPenney) stores but in a large amount of them. The business is not as good as it used to be but is nevertheless quite favorable," LVMH Financial Director Jean-Jacques Guiony told analysts after the group posted second-quarter sales.

"We are one of the pockets of growth of J.C. Penney, we are important to them, they are important to us," Guiony said.

LVMH relies on Sephora as one of its biggest sales drivers after its fashion and handbag brand Louis Vuitton.

The beauty retailer has pushed rapidly into the United States in recent years, taking on rivals like Ulta <ULTA.O>, in part by building out stores within JCPenney premises under a partnership that started in 2006.

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A J.C. Penney Company Inc. store is pictured at a mall in Langhorne, Pennsylvania, U.S. November 17, 2018. REUTERS/Suzanne Barlyn

It now has more than 660 shops under the JCPenney umbrella, which still outnumber the 500 standalone stores it has opened across the Americas. This year, it has announced 35 openings of non-JCPenney U.S. stores, and is also pushing online sales.

Sephora also faces growing competition from the likes of Amazon.com Inc <AMZN.O>, as the e-commerce giant pushed into cosmetics with its own brands and a collaboration with singer Lady Gaga.

LVMH's retailing division, which also includes duty-free shopping operator DFS, had posted muted comparable sales growth of 3% in the fourth quarter of last year, partly due to a sluggish U.S. turn at Sephora at a time when make-up sales globally are softening.

"We had a better second quarter than the first quarter, which in turn was much better than the fourth quarter of last year, so gradually the situation is improving," Guiony said.

The retailing division grew 7% in the April to June period from a year earlier.

J.C. Penney - which is in turnaround mode and refocusing more on clothing as it tries to counter falling footfall - said in May that sales at stores open for at least a year had fallen more than expected during the first quarter.

(Reporting by Sarah White; Editing by Richard Chang)

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