J.C. Penney's turnaround is gaining traction.
The department store chain said Friday that its losses narrowed in the second quarter on better-expected sales, fueled by men's clothing, fine jewelry and the beauty brand Sephora. And a key revenue measure rose for the third straight quarter.
Shares of the company rose nearly 5 percent in afternoon trading.
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"Although there is much work to do ... it's clear that when we execute well, we can deliver profitable sales and take market share," said Marvin Ellison, a former Home Depot executive who took over as CEO on Aug. 1 and presided over his first earnings call for Penney.
The results offer encouraging signs for the Plano, Texas-based retailer, which is more than two years into an effort to recover from a disastrous attempt to reinvent itself under former Apple executive Ron Johnson. That led to massive losses and plummeting sales.
Ellison took over the top job from Myron Ullman, who became executive chairman of the board. Ullman, who had previously run the company, came back as CEO in 2013 after Johnson was pushed out. Ullman helped pick Ellison, and the two executives have been running the company together since last November.
But J.C. Penney still has an uphill road to a full recovery.
Ullman stabilized the business by restoring frequent discounts and bringing back basic merchandise and popular store brands that Johnson eliminated. But sales are still well below where they were before he took over, and the retailer continues to rack up losses, though they're shrinking.
In the latest fiscal year ended January 2015, annual sales were $12.25 billion, far below the $17.2 billion level in the fiscal year that ended in January 2012. Johnson became CEO in November 2011.
Now, Ellison is being tasked to pump up sales growth by sprucing up some departments like jewelry and dramatically expanding online sales after falling behind rivals.
He also wants to transform the company into a more efficient operator. Ellison spelled out a litany of problems in an earnings call with investors Friday, such as Penney not using analytics when it comes to pricing. He also said its customer loyalty program "isn't very good." And it needs to get better in replenishment and one-on-one marketing.
On top of its own woes, Penney is facing broader challenges that are tripping up department store peers that cater to middle-income shoppers who haven't been benefiting much from the economic recovery.
Shoppers' spending is also shifting away from department-store specialties such as clothing and more toward restaurants, autos and smartphones. Penney's results follow disappointing financial results from Macy's Inc. and Kohl's Corp, while Nordstrom was a bright spot.
J.C. Penney lost $138 million, or 45 cents per share, for the quarter that ended Aug. 1. That compares with a loss of $172 million, or 56 cents per share, a year earlier.
Losses, adjusted for one-time gains and costs, were 41 cents per share.
Revenue rose 2.7 percent to $2.88 billion.
The average estimate of 10 analysts surveyed by Zacks Investment Research was for a loss of 50 cents per share.
Revenue also topping Street forecasts. Eight analysts surveyed by Zacks expected $2.86 billion.
Revenue at stores opened at least a year rose 4.1 percent, in line with analysts' estimates.
Shares rose 4 percent, or 35 cents, to $8.41 in afternoon trading Friday. The stock has lost 81 percent of its value since February 2012, when enthusiasm over Johnson's reinvention plan pushed up the stock to $43.