J.C. Penney Co. shares surged after the company raised its profit forecast, even amid another quarterly sales decline, as the battered department-store chain’s turnaround plan gains more time to play out.  

-Excluding some items, earnings before interest, taxes, depreciation and amortization will exceed US$475 million this year, up from a previous forecast of between US$440 million and US$475 million. The chain also posted a drop in inventory.  

Key Insights

-J.C. Penney’s report shows it’s making progress in improving its operations, and that cheered investors. “We are beginning to see results -- both in our numbers and how we operate as a business,” Chief Executive Officer Jill Soltau said in a statement.

-Still, same-store sales, a closely watched metric in retail, fell 9.3 per cent in the third quarter. That’s worse than the average projection for a drop of 8.3 per cent, according to Consensus Metrix. With foot traffic falling and five straight quarterly declines in same-stores sales, the chain is testing new store formats and in-store experiences.

-This holiday season is especially critical for the retailer. Soltau told Bloomberg News in September that J.C. Penney would “show up this holiday in a way our customer hasn’t seen in a long time.” Investors will have to wait for the conference call later this morning to hear more on those plans.

-The retailer reported liquidity of about US$1.7 billion for the quarter, and reaffirmed its expectation for US$1.5 billion of liquidity at the end of the year.

Market Reaction

-The shares jumped as much as 22 per cent in early trading on Friday. The stock has gained 5.8 per cent this year through Thursday’s close.

--With assistance from Katherine Doherty.