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Here’s Why J.C. Penney Keeps Killing It

J.C. Penney (JCP) is the reigning comeback kid of department stores.

The retailer reported that online sales and sales at stores open at least a year rose 4.1% during the holiday quarter, delivering much stronger numbers than rivals Macy’s (M), Sears (SHLD), and Dillard’s (DDS), where revenue fell, and Kohl’s (KSS) where sales barely rose.

Penney, which four years ago saw sales fall $4 billion after a disastrous attempt to become trendier, has focused on expanding in-store brands, rebuilding its once dominant e-commerce, and improving services in stores to win back shoppers.

Under Marvin Ellison, profiled in the cover story of the current issue of Fortune, Penney has worked on prosaic matters like inventory managements and supply chain improvements. Penney’s quarterly sales performance was its eighth such period of growth in the last nine quarters. Better inventory management has meant using extra store stock to help fill online orders, leading to reduced markdowns and also making sure stores are stocked. That resulted in higher gross margins. Total sales for the quarter were $4 billion, up 2.5% from a year earlier despite having 33 fewer stores.

“Our focus on private brands, omnichannel and revenue per customer is clearly resonating as we continue to win market share in a competitive environment,” Ellison said in a statement.

Penney expects its improvement to continue, forecasting comparable sales will increases 3% to 4% this year. This compares to forecasts at Macy’s for a modest drop, and Kohl’s expectation for a small rise at best. Both those retailers are closing some stores this year.


But perhaps most importantly, Penney expects to generate earnings before interest, taxes, depreciation, and amortization (EBITDA) of $1 billion, getting it closer to the $1.2 billion mark it has promised investors it would reach in 2017. (This year it hit $715 million. ) EBITDA is closely watched by lenders and is a crucial metric for Penney, which carries $5 billion in debt.