Why Investors Shouldn't Be Surprised By J C Penney's Earnings Beat?

J C Penney Company Inc JCP declared better than expected first-quarter earnings post the closing bell on Wednesday. The company declared an EPS loss of $0.55 for the quarter, while the Street was expecting an EPS loss of $0.80.

ormer Loehmann's CEO Steven Newman was on Bloomberg recently to weigh in on J C Penney’s earnings.

Not Surprised

“J C Penney is in [the] turnaround and they are doing a good job obviously of getting their customers who they pissed off to come back in and to spend money and visit them,” Newman said.  “And they have maybe easier job than some other people who have to keep going after business every month, every day, every year, versus them trying to get back the share that they lost.”

He continued, “So, it’s hard for them to gauge how much they are going to increase on a daily, monthly, weekly basis. But I am not surprised because their numbers were so bad that for them they get a pass for this next year or two because they should be comping. If they are not comping they should probably go bye-bye.”

Built In

On the incremental increase in J C Penney’s gross margin Newman said, “When you see prices that is being advertised, they are not losing money 99.9 percent of the time, they are putting out prices they negotiated and at their margins. So, I am not surprised that their margins are good because otherwise they won’t be able to pay their rent and pay their advertising and [so on so forth]. So I am not as surprised because that’s all built in ahead.”