J.C. Penney Q1 sales, profit fall, but turnaround 'on track'

J.C. Penney (JCP) reported first quarter sales Friday well below analyst expectations, following a week of disappointing earnings reports from traditional department store retailers.

Shares are down 3.8% in morning trading. Still, CEO Marvin Ellison assured that the company's turnaround plan "remains on track."

The retailer said its in-store Sephora beauty shops continue to help drive traffic and that its plan announced earlier this week to put an appliance showroom in nearly 500 stores should boost sales throughout the rest of the year.

Net sales for the quarter fell 1.6% from $2.86 billion in the year-ago quarter to $2.81 billion. That was below analysts estimates for revenue of $2.92 billion, according to S&P Global Market Intelligence. Sales at stores open at least a year fell 0.4%.

The company reported a loss of $68 million, or 22 cents a share, which was better than the 37 cent-a-share loss analysts estimated. That compares to a loss of $150 million in the year-ago quarter.

Traditional department stores are having a tough go of it lately, failing to convince shoppers it's worth regularly spending money on clothing and housewares. Macy's, Kohl's and Nordstrom all posted disappointing quarters earlier this week. Many retailers experienced slowdowns throughout March and April due to unseasonable weather, a problem that occurred during the holiday season too as winter started off warmly in many areas.

Ellison acknowledged Friday that Penney needs to rely less on apparel sales to drive business growth given the impact of weather. "We know we must continue to pivot our merchandise assortment to less weather-sensitive categories," he said.

Penney is in the middle of revitalizing its business after a botched turnaround plan several years ago. Ellison reiterated the company's expectation that same-store sales will get a 3% to 4% bump this year, on the back of the success of the Sephora shops and its decision to accelerate the nationwide appliance rollout. In the quarter, Sephora, plus men's, footwear and handbags were among the top-performing categories.

The company's appliance test that started in February has already shown signs of drawing in new customers and improving sales, contributing to Penney's decision to roll it out more broadly. More than one-third of appliance customers during the test were new customers, Ellison said, and the average transaction was more than $1,200.