JCPenney reported a slightly wider operating loss in the first quarter as sales slid 4.6 percent. A bright spot was the Active category, which grew “significantly” due to expanded assortments of Nike apparel and NCAA fleece. 

Sales fell to $1.25 billion from $1.31 billion. Net revenues, including credit income, fell 4.4 percent to $1.31 billion from $1.37 billion 

The operating loss widened to $62 million from $52 million a year ago. The net loss shrank slightly to $65 million from $69 million a year ago as net interest declined to $2 million from $15 million the prior year. 

In its filing, JCPenney said gross margins were impacted by tariffs and promotional pressures, but results outperformed internal expectations with the help of cost controls and synergies from its merger with SPARC Group, which includes Aéropostale, Brooks Brothers, Eddie Bauer, Lucky Brand, and Nautica. In January 2025, Penney announced it was merging with SPARC Group to form Catalyst Brands. 

The quarterly figures were included in a regulatory filing from Copper Property CTL Pass Through Trust, which was established as part of Penney’s bankruptcy filing to acquire 160 JCPenney stores and six distribution centers. 

Penney said in the filing regarding its results, “During the first quarter of fiscal 2026, JCPenney continued to prioritize providing America’s diverse working families with fashion choices at a compelling value that fits within their discretionary budgets in the current economic environment. Customer engagement during the period included events and value-oriented offers such as the Spring 2026 Really Big Deals program, which generated sales growth and additional customer traffic. Prior investments made in the digital experience resulted in digital traffic increases of 5 percent alongside average order value increases in the quarter. In addition, credit income increased $2 million over the prior year.  Overall, the company was able to strategically manage through the softer demand environment, resulting in outperformance against internal expectations for the period. 

“Gross margin declined primarily as a result of tariff costs, shifts in category mix and increased promotional activity. Category performance was led by Active, Jewelry and Home. Active increased significantly versus last year, driven by an expanded offering of Nike apparel and NCAA fleece, while Jewelry increases were driven by Gemstones, growth in Silver, and continued momentum in Watches. Home exceeded expectations across Bed, Bath, Electrics, and Rugs. Additional strong performers included Women’s Apparel private brands St. John’s Bay and Liz Claiborne, while Beauty and Salon performance benefited from new fragrance launches during the quarter. Selling, general and administrative expenses decreased from the prior-year period, reflecting continued cost management. Restructuring, impairment, store closing and other costs were $2 million that were related to various activities including facility closures and transition costs associated with the acquisition. Synergy activities related to the company’s parent acquisition of SPARC Group are ongoing, and, to date, the company has already achieved more than was expected. It is currently anticipated that the entirety of the synergies expected to be activated by the end of 2027 will be fully activated by the end of this fiscal year.  Additionally, it is anticipated that the company will exceed the initial expected synergy savings in connection with the acquisition. 

“Capital expenditures during the period were $22 million, compared with $18 million in the prior- year period, and were focused on customer-facing initiatives. As of the end of the quarter, merchandise inventory was $1.6 billion, 1 percent below last year. In connection with the Supreme Court ruling regarding the legality of the IEEPA tariffs, the company anticipates receiving significant refunds in fiscal 2026, with some potentially occurring as late as 2027. As the timing of the payments is uncertain, the company is not making any anticipatory accruals but rather expects to record the refunds as received. As of the end of the first quarter, no refunds have been collected, and therefore no impact is in these financial statements. The first refunds will be included in the second quarter’s results. 

“The company ended the quarter with no long-term debt outstanding, compared with $468  million in the prior-year period. The company also had no borrowings outstanding under the  Parent’s Revolving Credit Facility as of quarter-end. As a result of lower debt balances, net interest expense declined to $2 million from $15 million in the same period last year and primarily relates to capital lease interest costs.” 

Image courtesy JCPenney