• by Sarah Mahoney  @mahoney_sarah, August 12, 2016

In more evidence that all department stores are not equal, J.C. Penney says its sales are up, and that it expects to return to profitability this year.

But Kohl’s and Macy’s, which just announced it would close 100 more stores to reflect consumers' increasing unwillingness to shop in physical stores, both reported another decline in sales. And while much in those three earnings reports beat industry expectations, the overall blah numbers add to the cloud of anxiety shrouding the category. 

Acknowledging that the industry faces “meaningful headwinds,” S & P Global Ratings downgraded Kohl’s to “negative” from “stable.” But it affirmed to “positive” outlook on Penney, calling its results “better performance compared with most department store peers.”

J.C. Penney says its comparable-store sales grew by 2.2% in the second quarter, which it says shows changes in strategy — including a much sharper marketing focus on promotions and bargains — are working, and helping it gain market share. Overall sales rose 1.5% to $2.92 billion, from $2.88 billion in the same period last year. (It says Sephora, home, footwear and handbags were the best sellers.) And it cut its losses to $56 million, compared with $117 million in the comparable period of 2015, an improvement of 52%, and says it is on track to earn its first profit in five years. In part, it attributed some of the gains in profitability to improved advertising efficiency. The Plano, Texas-based store affirmed its forecast of an overall sales gain of between 3% and 4% for the full year. 

But at Kohl’s, sales fell 2% to $4.18 billion, from $4.27 billion in the prior year. On a same-store basis, that decline was 1.8%. And net income rose to $140 million, from $130 in the year-ago period. In its announcement, CEO Kevin Mansell conceded the sales were a disappointment, but says the Menomonee Falls, Wisconsin-based chain is encouraged by back-to-school sales so far.

The news — and in particular, weaker store traffic — caused S&P to downgrade its rating for Kohl’s. "The outlook revision reflects the company's continued soft operating performance, and our expectation that these trends will likely persist over the next 12 to 24 months,” writes said credit analyst Helena Song.

Macy’s, meanwhile, posted a 3.9% drop in sales for the quarter, to $5.87 billion compared with sales of $6.10 billion in the same period last year, and a 2% drop in same-store sales. But it says they have been improving month-by-month throughout the quarter. “We are encouraged by the distinct improvement in our sales and earnings trend in the second quarter,” says chairman Terry J. Lundgren, in its announcement. “Over the past few months, we have been saying that a setback is a setup for a comeback, and we now believe we are set up well to proceed to a comeback.” 

The company reaffirmed its forecast for the rest of the year, and said its store closures would still allow it to maintain a bricks-and-mortar presence in key markets while enhancing its online performance.