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2 retailers top estimates of some analysts

Shares of J.C. Penney and Abercrombie rose in a possible signal of growing consumer demand.

    by By Lauren Coleman-Lochner and Heather Burke, Bloomberg News, Inquirer
    Published 

J.C. Penney Co., the third-largest U.S. department-store chain, posted second-quarter profit that beat some analysts' estimates after slowing inventory growth, while teen-apparel retailer Abercrombie & Fitch Co. bolstered sales by limiting discounts, the companies said yesterday.

J.C. Penney shares rose after it reduced supplies of its slowest-selling clothes. Abercrombie also rose after sales gained 5.1 percent as the company opened stores and resisted cutting prices of jeans and T-shirts.

The gains indicated retailers have managed to weather the slumping economy, and a drop in oil prices yesterday raised the prospect of a rebound in consumer demand.

"They're executing well in a tough environment," said Lauri Brunner, an analyst at Thrivent Asset Management in Philadelphia, said of J.C. Penney. The firm has $73 billion in assets, including holdings in J.C. Penney.

Confidence among U.S. consumers gained in August, bolstered by a decline in commodities prices. The Reuters/University of Michigan preliminary index of consumer sentiment rose to 61.7, from 61.2 in July, the second monthly increase.

Second-quarter net income at Plano, Texas-based J.C. Penney dropped 36 percent to $117 million, or 52 cents a share, from $182 million, or 81 cents, a year earlier. Profit exceeded revised analysts' estimates by 1 cent.

Sales fell 2.5 percent to $4.28 billion a year earlier. Third-quarter profit may be 70 cents to 75 cents a share, J.C. Penney said in a statement. Analysts surveyed by Bloomberg estimated 76 cents.

Consumers besieged by higher costs have sought out Wal-Mart Stores Inc. and Costco Wholesale Corp. for bargains on basics. Wal-Mart said Thursday that second-quarter profit rose 17 percent to $3.45 billion, or 87 cents a share, exceeding analysts' estimates.

Abercrombie's net income declined 4.2 percent to $77.8 million, or 87 cents a share, from $81.3 million, or 88 cents, a year earlier, the company said. Sales in the three months through Aug. 2 rose 5.1 percent to $845.8 million from $804.5 million. Excluding one-time costs, earnings beat analysts' estimates by 1 cent a share.