What Drove JCPenney’s Sales Growth in 2Q15?



JCPenney’s 2Q15 sales

JCPenney’s (JCP) sales in the second quarter of fiscal 2015 ended August 1, 2015, came in at $2.88 billion. The company beat the consensus Wall Street analyst sales estimate of $2.86 billion. 2Q15 was the third consecutive quarter in which the company reported sales growth.

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Sales growth drivers

JCPenney’s sales in 2Q15 increased by 2.7% from the comparable quarter of the previous year. The company’s sales were driven by strong performance in the men’s, home, fine jewelry, and Sephora categories.

The company’s same-store sales increased by 4.1% in 2Q15. The Sephora store-within-a-store beauty business in JCPenney’s stores posted double-digit same-store sales growth. Sephora has a presence in over half of JCPenney’s stores. JCPenney considers Sephora, which is owned by the luxury group LVMH Moet Hennessy Louis Vuitton (LVMUY) as a key growth driver. This beauty business offers tremendous cross-sell opportunities.

JCPenney also benefitted from key events in the quarter, including Mother’s Day, Father’s Day, Memorial Day, and July 4. Mother’s Day specifically drove purchases in women’s dresses, handbags, accessories and fashion, and jewelry.

Comparison with competitors

Nordstrom (JWN) reported an impressive 9.1% sales growth in 2Q15 driven by continued growth in its off-price Rack store sales and online businesses. Macy’s (M) 2Q15 sales fell by 2.6% to $6.1 billion in 2Q15. Macy’s attributed this decline to lower international tourist spending, weakness in certain core categories, and the absence of a key promotional event. Kohl’s (KSS) reported a 0.6% growth in its 2Q15 sales. Kohl’s blamed the softness in 2Q15 sales on the shift in the timing of sales tax holidays in certain states from July to August.

JCPenney, Macy’s, and Kohl’s together account for 0.2% of the portfolio holdings of the iShares Russell 1000 Value ETF (IWD). These three companies along with Nordstrom constitute ~4% of the SPDR S&P Retail ETF (XRT). The next part of our series discusses JCPenney’s margins in 2Q15.


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