J.C. Penney Co Inc reported a higher quarterly profit as it benefited from increased sales of its exclusive merchandise and cost-cutting, and the department store operator raised its full-year profit forecast, sending its shares up 6 percent.
Penney in recent years has tried to turn itself into a more fashionable retailer, landing exclusive lines from Liz Claiborne and being the only U.S. department store to feature Spanish fast-fashion retailer Mango's store-in-stores.
It has also sought to control costs by changing the way it manages inventory and shuttering weaker businesses such as its catalog operation, which it is winding down.
Penney reported that first-quarter net income rose 6.7 percent to $64 million, or 28 cents per share, from $60 million, or 25 cents a share, a year earlier. That beat analysts' average estimate of 24 cents a share, according to Thomson Reuters I/B/E/S.
Penney Chief Executive Myron Ullman in a statement said the benefits of the company's cost-cutting efforts would continue to significantly accelerate profitability.
Penney's upbeat forecast echoed those of Macy's Inc and Kohl's Corp , suggesting that middle-class shoppers who frequent department stores are feeling more confident.
Penney customers are considered more exposed to unemployment and economic slowdown than Macy's customers. But exclusive lines such as the Claiborne clothes give Penney greater ability to set its prices and protect its margins, and give shoppers a reason to go its stores rather than to rivals.
Penney, whose largest shareholder is billionaire investor William Ackman's Pershing Square Capital Management, said gross margin fell 0.9 percentage point to 40.5 percent in the first quarter, in part because of free shipping offered to online shoppers.
Total net sales rose just 0.4 percent to $3.9 billion as its exit from the catalog business dampened its growth.
As reported earlier this month, sales at stores open at least one year rose 3.8 percent during the quarter, which ended on April 30.
Penney, which operates 1,100 stores, said it expects same-store sales to rise between 3 and 4 percent in the current quarter.
For the full year, Penney raised its profit per share forecast by 15 cents, to a range of $2.15 and $2.25, above Wall Street forecasts.
Penney shares rose $2.34 in premarket trading to $40.78. The Shares have nearly doubled since their 52-week low of $19.44 last August.
(Reporting by Phil Wahba, editing by Gerald E. McCormick and John Wallace)