J.C. Penney loss narrows as Sephora stores help attract shoppers

Fri Aug 14, 2015 3:14pm EDT
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By Subrat Patnaik

(Reuters) - J.C. Penney Co Inc (JCP.N: Quote) reported a smaller-than-expected quarterly loss, helped by demand for home goods and high-end Sephora beauty products, indicating that the department store operator's turnaround efforts were starting to pay off.

Shares of the company, which also said the current quarter was off to a strong start, rose as much as 9 percent in early trading on Friday.

J.C. Penney has been increasing the number of stores run by popular beauty brand Sephora — owned by luxury giant LVMH (LVMH.PA: Quote) — within its stores to attract shoppers.

"Having Sephora in stores helps J.C. Penney drive sales, but it also encourages shoppers to visit, so it helps to drive customer traffic," Neil Saunders, chief executive of research firm Conlumino, said.

"Those people may then go on to buy other things."

J.C. Penney set up more Sephora outlets within its stores following pressure from activist investor Bill Ackman during an ill-fated attempt to go 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.

Home products at J. C. Penney are selling well because it has relatively less competition than fashion, Saunders said.   Continued...

Customers ride the escalator at a J.C. Penney store in New York August 14, 2013. REUTERS/Brendan McDermid