Holiday Sales Rebound at Macy's and J.C. Penney -- 2nd Update

By Suzanne Kapner and Allison PrangFeaturesDow Jones Newswires

A healthy economy and strong consumer spending gave a boost to Macy's Inc. and J.C. Penney Co., which reported sales growth for the critical holiday months.

Macy's said same-store sales rose 1% in November and December from a year ago, while Penney's increased 3.4%. The results were an improvement from a year ago when both chains reported declines. The big mall anchors are the first major retailers to give investors a readout on the holiday season.

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Analysts and economists have predicted that low unemployment and rising wages gave consumers at all income levels the confidence to spend this holiday season. Retailers had their best holiday sales since 2011, according to Mastercard SpendingPulse, which tracks all forms of payments both in stores and online.

Both Macy's and Penney have struggled with falling sales as shoppers make fewer trips to malls and do more of their spending on smartphones. They have responded by closing weaker locations and ramping up investments in e-commerce.

"Consumers were ready to spend this season, and we delivered with solid execution," said Macy's CEO Jeff Gennette.

Penney CEO Marvin Ellison said his company's push into home appliances paid dividends. "We had over 30% growth in appliances, and we think that market share is coming from Sears," Mr. Ellison said in an interview

On Thursday, Macy's said it would close 11 stores earlier than planned this year. They were part of about 100 closures the company had announced in August 2016. It will also be making staff changes that will involve downsizing or increasing staff in different stores.

Mr. Ellison said Penney wasn't planning any significant store closings this year.

After weak sales last holiday season, Macy's announced plans to cut 10,000 jobs and Penney unveiled plans to close 138 stores and offer buyouts to 6,000 workers.

On Thursday, Macy's increased its adjusted earnings guidance for fiscal year 2017 to be between $3.59 and $3.69 a share given the effect tax reform will have on the company's yearly tax rate. The retailer said it expects total sales during the 2017 fiscal year to fall between 3.6% and 3.9%.

Neil Saunders, a managing director of research firm GlobalData Retail, said that while Macy's positive results were a welcome change from the string of declining sales it has been posting, he cautioned that the retailer's growth is still weak and that it's likely losing share to other players.

"These results are a step in the right direction, but Macy's has a very long journey ahead of it before it can declare itself to be on the path to prosperity," Mr. Saunders wrote in a note to clients.

Penney said it was reaffirming its previous financial targets, which include a forecast of fiscal 2017 comparable sales that will be flat to down 1% from a year ago.

"Consumer confidence is high, unemployment is low and we think the new tax legislation will benefit our core customers," Mr. Ellison said. "That should lead to positive sales growth in 2018."

After rallying in recent weeks, the shares of Macy's and Penney slipped Thursday. Macy's shares were down 3% in early afternoon trading, while Penney's shares dropped 4.5%.

Write to Suzanne Kapner at Suzanne.Kapner@wsj.com and Allison Prang at allison.prang@wsj.com

(END) Dow Jones Newswires

January 04, 2018 14:32 ET (19:32 GMT)