J.C. Penney profit inches higher

NEW YORK (Reuters) - J.C. Penney Co. (JCP.N) said on Thursday quarterly profit inched higher, topping Wall Street expectations, generated by back-to-school sales and new private-label brands.

The department store owner said net profit for the second quarter that ended August 4, was $182 million, or 81 cents per share, compared with $179 million, or 76 cents per share, a year earlier.

Excluding a charge of 2 cents a share related to the extinguishment of debt, earnings from continuing operations were 80 cents per share, 2 cents better than analysts' average forecast, according to Reuters Estimates.

Penney's Chief Executive Mike Ullman said the company is facing "a difficult economic environment, an environment we don't expect to get any easier in the third and fourth quarters of the year.

"We know that higher energy prices and the impact of the slow-down of the housing markets are weighing on our customers' minds," Ullman said during a call with analysts.

NEW OFFERINGS BOOST SALES

Plano, Texas-based Penney has been working to boost sales by offering more fashionable merchandise and adding new private-brands, such as Ambrielle intimate apparel and Liz & Co. by Liz Claiborne Inc. (LIZ.N).

Second-quarter sales rose 3.6 percent to $4.39 billion, below analysts' average estimate of $4.45 billion.

Internet sales climbed 17.4 percent, while direct sales, which include its catalog, fell 2.3 percent.

Comparable-store sales, or sales at stores open at least a year, increased 1.9 percent.

The company's gross margin improved by 80 basis points to 38.1 percent of sales, helped by better merchandise flow and the inclusion of the first week of August, an important back-to-school week, in the second quarter. The year-earlier second quarter did not include the first week of August.

"JCP's results should be more than enough," JP Morgan analyst Charles Grom wrote in a research note. The second quarter "was a little sloppy (but not much) and the back-half view is a little cryptic, but makes sense if you run the numbers."

Penney forecast earnings of $1.28 per share for the third quarter and $2.41 per share for the fourth quarter.

Analysts on average expect third-quarter earnings of $1.41 per share and fourth-quarter profit of $2.27 per share, according to Reuters Estimates.

For the full year, Penney expects earnings from continuing operations of $5.50 per share, in line with analysts' average forecast.

Penney said it expects third-quarter comparable-store sales to rise in the low-single digits, and total department store sales to be up in the low- to mid-single digits.

Penney shares rose $1.03, or 1.65 percent, to $63.60 in morning trading on the New York Stock Exchange.

(Reporting by Martinne Geller and Sarah Coffey)