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UPDATE 2-J.C. Penney's loss worse than expected; shares hit record low

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Aug 11 (Reuters) - J.C. Penney Co Inc reported a bigger-than-expected quarterly loss as a challenging retail environment continued to take a toll on its comparable sales, sending its shares tumbling 21 percent to a record low.

Sales at Penney's stores open more than 12 months fell for the fifth straight quarter to 1.3 percent, slightly worse than the 1.2 percent decline expected by analysts polled by research firm Consensus Metrix.

Penney's weaker-than-expected same-store sales was in contrast to those from Macy's Inc and Kohl's Corp. The larger rivals had reported better-than-expected quarterly profit and comparable sales on Thursday.

Department stores have been struggling with declining mall traffic and tough competition from off-price retailers and ecommerce behemoth Amazon.com Inc.

However, Penney highlighted improved performance in its apparel business, including a "significant acceleration" in kids' apparel. The business had been a drag on sales for several quarters.

Penney's net loss widened to $62 million, or 20 cents per share, in the second quarter ended July 29, from $56 million, or 18 cents per share, a year earlier.

The retailer's gross margins took a hit as it liquidated inventory in 127 underperforming stores that it is shutting.

Excluding items, the company reported a loss of 9 cents per share, worse than the average analyst estimate of 5 cents loss, according to Thomson Reuters I/B/E/S.

However, net sales rose 1.5 percent to $2.96 billion, coming in better than $2.84 billion estimated by analysts. (Reporting by Sruthi Ramakrishnan in Bengaluru, Editing by Anil D'Silva)