By Sruthi Ramakrishnan

(Reuters) - J.C. Penney Co Inc's <JCP.N> quarterly loss more than halved as the company cut costs and benefited from higher sales of home goods and footwear as well as beauty products at Sephora outlets in its stores.

The department store operator also reaffirmed its full-year forecast of a 3-4 percent growth in comparable store sales, putting the company on track to achieve its first full-year adjusted profit in five years.

Penney joined Macy's Inc <M.N> and Kohl's Corp <KSS.N> in reporting better-than-anticipated results, although expectations were low for all three. Penney was the only one which managed to increase comparable sales in the quarter.

Department stores have been facing intense competition from online retailers such as Amazon.com Inc <AMZN.O> and off-price chains such as TJX Cos Inc's <TJX.N> T.J.Maxx.

Shoppers are also spending more on big-ticket items such as electronics and cars than on clothes, a critical category for department stores.

Highlighting the challenges facing department stores, data on Friday showed that sales at clothing stores fell 0.5 percent in July, while online retail sales rose 1.3 percent. Apparel is the biggest-selling category online.

Penney, whose shares were up about 1 percent on Friday, said sales at stores open at least a year rose 2.2 percent. That matched the average estimate of analysts polled by research firm Consensus Metrix.

"The (results) demonstrate that the company's recovery program is still on track, and that the weakness in the last period was largely attributable to unseasonal weather and a general slowdown in the consumer economy," Håkon Helgesen, an analyst at retail research firm Conlumino, wrote in a note.

Penney said clearance sales were down in July, usually a clearance-heavy month for the company.

"Our regular-price selling was up mid-single digits in July, so we feel really good moving into third quarter," Chief Financial Officer Ed Record said on a conference call.

Penney is also diversifying from weather-sensitive products such as apparel by adding more furniture, curtains and blinds. It plans to add appliance and Sephora shops in more stores in the third quarter.

Up to Thursday's close, Penney's shares had gained 16 percent in the past month in anticipation of an upbeat quarter. The stock closed up 8.6 percent on Thursday, following results from Macy's and Kohl's.

Penney's net loss more than halved to $56 million, or 18 cents per share, in the quarter ended July 30, helped by a 6 percent drop in operational expenses.

Excluding items, the company's net loss was 5 cents per share. Net sales rose 1.5 percent to $2.92 billion.

Analysts on average had expected a loss of 15 cents per share and revenue of $2.93 billion, according to Thomson Reuters I/B/E/S.

(Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Saumyadeb Chakrabarty)