J.C. Penney impressed investors on Friday by reporting smaller-than-expected quarterly losses. The company was given a big assist from its home good and high-end Sephora beauty product offerings.
Shares rose by as much as 9 percent in early trading on Friday after the company said Q3 was also off to a great start.
J.C. Penney has been increasing the number of stores run by popular beauty brand Sephora — owned by luxury giant LVMH. The retailer uses Sephora to help attract high-end shoppers to its discount clothing outlets.
“Having Sephora in stores helps J.C. Penney drive sales, but it also encourages shoppers to visit, so it helps to drive customer traffic,” said Neil Saunders, chief executive of research firm Conlumino. “Those people may then go on to buy other things.”
J.C. Penney stores started adding Sephora outlets after activist investor Bill Ackman tried to bring the retailer upmarket.
Sephora outlets accounted for 12 percent of the company’s sales last year, along with women’s accessories. J.C. Penney had 515 Sephora stores as of Aug. 1.
J.C. Penney’s net loss fell to $138 million, or 45 cents per share, in the second quarter ended Aug. 1, from $172 million, or 56 cents per share, a year earlier.
The company reported a loss of 41 cents per share while revenue rose 2.7 percent to $2.88 billion. Analysts believed the company would report a loss of 7 cents per share.
At stores opened more than one year J.C. Penney reported an increase in sales of 4.1 percent, beating a 3.9 percent prediction from analysts.
The company has continued to show improvement since abandoning its attempt to go upmarket in 2013.