UPDATE 3-Penney says September sales show improving trend

Tue Oct 8, 2013 1:39pm EDT
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(Adds analyst comment, updates shares, bylines)

By Phil Wahba and Siddharth Cavale

Oct 8 (Reuters) - J.C. Penney Co Inc on Tuesday told investors for the second time in less than two weeks that sales trends are improving, seeking to quell fears about its turnaround that have pummeled the retailer's shares.

Penney, urgently trying to lure back shoppers this year after a failed attempt to go upmarket in 2012 led to a 25 percent drop in sales, reported a smaller decline in same-store sales for September than for August, sending shares up as much as 6.9 percent in regular trading.

The U.S. retailer again said it expected improvements in business to continue for the remainder of the year, repeating an assertion it made on Sept. 26, hours before it announced it was issuing 84 million new shares to build its war chest.

Penney has been dogged by countless downgrades of late on growing fears that the return to deep discounting and merchandise favored by long-time shoppers was taking longer than expected to revive sales.

On Tuesday, Sterne Agee analyst Charles Grom, one of the few optimists left on Wall Street about Penney, downgraded his recommendation to "neutral from buy." Last week, credit rating agency Fitch downgraded Penney deeper into "junk" territory.

Shares have fallen 40 percent since August 20, when Penney reported its second quarter earnings, and on Monday hit their lowest levels since 1981.

A Penney spokeswoman said the company had issued the update to give investors a more detailed account of its progress given market speculation surrounding its turnaround.   Continued...