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Shares in J.C. Penney rose more than 6 percent despite the retailer forecasting a sharper-than-expected fall in first quarter sales.
Shares in J.C. Penney jumped more than 6 percent on Wednesday despite the struggling retailer forecasting a sharper-than-expected fall in first-quarter sales.
In a filing late Tuesday, J.C. Penney said it expected sales for the quarter ended Saturday to decline 16.4 percent from a year earlier to roughly $2.64 billion.
That would be worse than the 13 percent fall many analysts expect.
J.C. Penney pointed the finger of blame at ex-CEO Ron Johnson, who was ousted last month after overseeing a near $1 billion loss in 2012 and a more than 50 percent drop in the company’s market value after his strategies to turnaround the company foundered.
“The sales decline in the first quarter is partially attributable to construction activities in connection with the transformation of the home departments in 505 stores. The Company noted that results for the quarter also reflect its prior pricing and marketing strategies, which are being changed under new leadership,” the company said in a statement.
So why are investors so happy?
Well, they may have taken comfort by the fact that the sales decline was only 16 percent.
Revenue in 2012 revenue plunged 25 percent to $13 billion.
“This is the first time the news hasn’t been horrific,” Liz Dunn, an analyst at Macquarie Group in New York, told Bloomberg.
“The numbers aren’t that bad.”
It is also possible that investors see some light at the end of the tunnel.
After replacing Johnson with his predecessor, Myron Ullman, last month, J.C. Penney has got to work on repairing its balance sheet.
The company has raised prices on some brands and plans to draw down $850 million from its $1.85 billion revolving credit line to replenish inventory.
Ullman also received a $1.75 billion loan commitment from Goldman Sachs, which he can use to fund the retailer’s operations and pay down debt.
On top of that, billionaire investor George Soros took a near 8 percent stake in the company.