Earnings Per Share Increased 34 Percent to $1.26 Per Share
Business Editors/Retail Writers
PLANO, Texas--(BUSINESS WIRE)--Nov. 9, 2006--J. C. Penney Company,
Inc. (NYSE: JCP)
Third Quarter 2006 Highlights
- Operating Profit increased 24 percent, or 140 basis points as
a percent of sales
- Comparable store and Internet sales increased 5.2 percent and
27 percent, respectively
- Opened 25 new stores, 22 in the off-mall format, accelerating
the store growth program
- Introduced East 5th in women's, and X-Games, Vans and Stevies
in children's
- Launched Sephora in the initial five stores and online at
jcp.com
- Announced Ambrielle, a new, sensual private lingerie brand to
be launched spring 2007
J. C. Penney Company, Inc. (NYSE: JCP) reported record third
quarter earnings today. Operating profit increased 24.1 percent to
$504 million from $406 million last year and improved 140 basis points
to 10.5 percent of sales. Operating profit improvement was driven by
strong sales performance, coupled with improved gross margin and
leverage of selling, general and administrative expenses. Third
quarter 2006 earnings per share from continuing operations increased
34 percent to $1.26 from $0.94 last year.
Myron E. (Mike) Ullman, III, chairman and chief executive officer,
said, "JCPenney's record third quarter performance reflects our
continued success in executing our Long Range Plan initiatives. Our
private and exclusive brands are growing in importance, clearly
differentiating JCPenney in the eyes of the consumer. With these
offerings, coupled with our strong national brands, we are providing
the styles our customers want. We are also making it even easier for
them to shop with us by expanding our market presence, with the
acceleration of our new store growth program in the third quarter.
"As we enter the holiday season, we believe our customers will
respond enthusiastically to our 'Red Box Gifts' program, which
includes a great selection of gifts for the special people in their
lives. These gift items are part of the wide selection of compelling,
fashion-right merchandise available at smart prices in our stores,
online at jcp.com and in our catalogs.
"During the third quarter, we introduced Sephora in five JCPenney
stores and we announced our new, sensual lingerie brand Ambrielle, and
the creation of two new lines with Liz Claiborne. These new offerings
will arrive in stores early next year, and they are examples of our
ongoing focus on providing our customers with an exciting shopping
experience."
Operating Results
Third quarter operating profit was $504 million, a 24.1 percent
increase from last year's $406 million. Total department store sales
increased 7.0 percent and comparable department store sales increased
5.2 percent. Sales were well ahead of the Company's initial guidance
and increased across all merchandise divisions and regions of the
country. The strongest merchandise results were in children's, men's
and family shoes, and the best regional performances were in the
southeast and the northeast. During the quarter, Direct sales
increased 5.3 percent, and www.jcp.com sales increased approximately
27 percent.
Gross margin improved by 80 basis points to 42.6 percent of sales,
reflecting continued benefits from private brand performance and
ongoing improvement in flow and management of merchandise inventories.
SG&A expenses improved 60 basis points to 32.3 percent of sales,
reflecting leverage in salaries and the Direct business. SG&A expenses
for the quarter include $14 million in pre-opening expenses related to
the 25 new and relocated stores which opened in the third quarter.
Beginning in the third quarter, Real Estate and Other is being
reported for all periods presented as a component of operating profit
to better align our reporting with industry practice. In the third
quarter, Real Estate and Other contributed income of $8 million
principally related to ongoing real estate operations, compared to $5
million of income last year.
Financial Condition and Other Items
The Company continues to maintain a strong financial condition. As
of Oct. 28, 2006, the Company had cash and short-term investments of
$2 billion and long-term debt, including current maturities, of $3.5
billion. Merchandise inventories were well controlled at $4.3 billion,
with planned increases associated with the opening of 25 new stores in
the third quarter essentially offset by better merchandise flow. Cash
flows from operating, investing and financing activities for the first
nine months were in line with expectations. The Company continues to
be on plan for the full year, with capital expenditures projected at
approximately $800 million.
During the quarter, the Company completed its existing $750
million common stock repurchase authorization with the repurchase of
3.3 million shares for a total of $220 million.
New FASB Pension Rules
The Financial Accounting Standards Board recently issued FAS 158
(Employers' Accounting for Defined Benefit Pension and Other Post
Retirement Plans), which will be effective at year-end 2006. This
standard requires recognition of the funded status of defined benefit
pension and other postretirement plans directly on the balance sheet.
Based on current estimates, the Company expects to record a decrease
in stockholders' equity in the area of $250 million, net of tax, at
year-end 2006, as a result of adopting this new rule. Adoption of FAS
158 will have no impact on cash flows or earnings per share.
Earnings Guidance
The following guidance reflects the Company's current expectations
for the fourth quarter:
-- Department store sales: total department store sales increase
of mid-single digits, with about $150 million related to the
53rd week this fiscal year. Low single digit comparable store
sales increase.
-- Direct sales: mid-single digit increase, with approximately
$50 million related to the 53rd week.
-- Operating profit margin: moderate improvement year-over-year,
primarily as a result of gross margin improvement. This year's
53rd week increases SG&A expenses by approximately $65
million, with no significant impact on earnings.
-- Interest expense: approximately $32 million.
-- Income tax rate: approximately 38.5 percent.
-- Average diluted shares: approximately 228 million average
diluted shares of common stock in the fourth quarter, and full
year average diluted shares of about 232 million (all share
guidance includes about 3 million common stock equivalents).
-- Earnings per share: approximately $1.94 in the fourth quarter.
Full year earnings are now expected to be in the area of $4.82
per share.
Conference Call/Webcast Details
Senior management will host a live conference call and real-time
web cast today, Nov. 9, 2006, beginning at 9:30 a.m. ET. Access to the
conference call is open to the press and general public in a listen
only mode. To access the conference call, please dial 973-935-2035 and
reference the JCPenney Quarterly Earnings Conference Call. The
telephone playback will be available for two days beginning
approximately two hours after the conclusion of the call by dialing
973-341-3080, pin code 6939848. The live web cast may be accessed via
JCPenney's Investor Relations page at www.jcpenney.net, or on
www.streetevents.com (for members) and www.earnings.com (for media and
individual investors). Replays of the webcast will be available for up
to 90 days after the event.
About JCPenney
J. C. Penney Corporation, Inc., the wholly owned operating
subsidiary of J. C. Penney Company, Inc., is one of America's largest
department store, catalog, and e-commerce retailers, employing
approximately 151,000 associates. As of Oct. 28, 2006, J. C. Penney
Corporation, Inc. operated 1,037 JCPenney department stores throughout
the United States and Puerto Rico. JCPenney is the nation's largest
catalog merchant of general merchandise, and jcp.com is one of the
largest apparel and home furnishings sites on the Internet. JCPenney
refers to the Internet/catalog business as Direct.
This release may contain forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements, which reflect the Company's current views
of future events and financial performance, involve known and unknown
risks and uncertainties that may cause the Company's actual results to
be materially different from planned or expected results. Those risks
and uncertainties include, but are not limited to, competition,
consumer demand, seasonality, economic conditions, including the price
and availability of oil and natural gas, changes in interest rates,
changes in management, retail industry consolidations, government
activity, and acts of terrorism or war. Please refer to the Company's
most recent Form 10-K and subsequent filings for a further discussion
of risks and uncertainties. Investors should take such risks into
account when making investment decisions. We do not undertake to
update these forward-looking statements as of any future date. In
addition, non-GAAP terms referenced are defined and presented in the
Company's most recent annual report on Form 10-K.
J. C. PENNEY COMPANY, INC.
SUMMARY OF OPERATING RESULTS
(Unaudited)
(Amounts in millions except per share data)
13 weeks ended
-----------------------------
Oct. 28, Oct. 29, % Inc.
2006 2005 (Dec.)
---------- ---------- -------
SALES PERCENTAGES:
-------------------------------------
Total department store sales increase 7.0% 3.0%
Comparable department store sales
increase 5.2% 2.5%
Direct sales increase/(decrease) 5.3% (0.9)%
STATEMENTS OF OPERATIONS:
-------------------------------------
Total net sales $ 4,781 $ 4,479 6.7%
Gross margin 2,039 1,874 8.8%
Selling, general and administrative
(SG&A) expenses 1,543 1,473 4.8%
Real estate and other income (8) (5) 60.0%
--------- ---------
Operating profit 504 406 24.1%
Net interest expense 36 41 (12.2)%
Bond premiums and unamortized costs - - N/A
--------- ---------
Income from continuing operations
before income taxes 468 365 28.2%
Income tax expense 182 131 38.9%
--------- ---------
Income from continuing operations $ 286 $ 234 22.2%
--------- ---------
Discontinued operations, net of
income tax (benefit)/expense of $-,
$-, $(1) and $28 1 - N/A
--------- ---------
Net income $ 287 $ 234 22.6%
========= =========
Earnings per share from continuing
operations - diluted $ 1.26 $ 0.94 34.0%
Earnings per share - diluted $ 1.26 $ 0.94 34.0%
FINANCIAL DATA:
-------------------------------------
Ratios as a % of sales:
Gross margin 42.6% 41.8%
SG&A expenses 32.3% 32.9%
Operating profit 10.5% 9.1%
Depreciation and amortization $ 98 $ 96
Effective income tax rate for
continuing operations 38.9% 36.0%
COMMON SHARES DATA:
-------------------------------------
Outstanding shares at end of period 224.7 232.0
Average shares outstanding
(basic shares) 225.1 246.3
Average shares used for diluted EPS 227.6 248.6
Shares repurchased 3.3 23.8
Total cost of shares repurchased $ 220 $ 1,162
J. C. PENNEY COMPANY, INC.
SUMMARY OF OPERATING RESULTS
(Unaudited)
(Amounts in millions except per share data)
39 weeks ended
--------------------------------
Oct. 28, Oct. 29, % Inc.
2006 2005 (Dec.)
---------- ---------- -------
SALES PERCENTAGES:
-------------------------------------
Total department store sales increase 5.5% 3.8%
Comparable department store sales
increase 4.4% 3.0%
Direct sales increase/(decrease) 4.0% 3.5%
STATEMENTS OF OPERATIONS:
-------------------------------------
Total net sales $ 13,239 $ 12,578 5.3%
Gross margin 5,436 5,084 6.9%
Selling, general and administrative
(SG&A) expenses 4,300 4,162 3.3%
Real estate and other income (30) (41) (26.8)%
---------- ----------
Operating profit 1,166 963 21.1%
Net interest expense 102 130 (21.5)%
Bond premiums and unamortized costs - 18 N/A
---------- ----------
Income from continuing operations
before income taxes 1,064 815 30.6%
Income tax expense 387 288 34.4%
---------- ----------
Income from continuing operations $ 677 $ 527 28.5%
---------- ----------
Discontinued operations, net of
income tax (benefit)/expense of $-,
$-, $(1) and $28 (1) 10 N/A
---------- ----------
Net income $ 676 $ 537 25.9%
========== ==========
Earnings per share from continuing
operations - diluted $ 2.90 $ 2.01 44.3%
Earnings per share - diluted $ 2.90 $ 2.05 41.5%
FINANCIAL DATA:
-------------------------------------
Ratios as a % of sales:
Gross margin 41.1% 40.4%
SG&A expenses 32.5% 33.1%
Operating profit 8.8% 7.7%
Depreciation and amortization $ 274 $ 271
Effective income tax rate for
continuing operations 36.4% 35.4%
COMMON SHARES DATA:
-------------------------------------
Outstanding shares at end of period 224.7 232.0
Average shares outstanding
(basic shares) 230.6 259.7
Average shares used for diluted EPS 233.2 262.3
Shares repurchased 11.3 44.0
Total cost of shares repurchased $ 750 $ 2,188
SUMMARY BALANCE SHEETS AND STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in millions)
Oct. 28, Oct. 29,
2006 2005
-------- --------
SUMMARY BALANCE SHEETS:
------------------------------------------------
Cash and short-term investments $ 1,976 $ 2,044
Merchandise inventory (net of LIFO
reserves of $24 and $25) 4,275 4,229
Other current assets 502 469
Property and equipment, net 4,023 3,655
Other assets 2,042 1,996
-------- --------
Total assets $12,818 $12,393
======== ========
Accounts payable and accrued expenses $ 3,145 $ 3,079
Current maturities of long-term debt 341 15
Current income taxes, payable and deferred - 119
Long-term debt 3,112 3,454
Long-term deferred taxes 1,252 1,293
Other liabilities 968 1,010
-------- --------
Total liabilities 8,818 8,970
Stockholders' equity 4,000 3,423
-------- --------
Total liabilities and stockholders' equity $12,818 $12,393
======== ========
39 weeks ended
-------------------
Oct. 28, Oct. 29,
SUMMARY STATEMENTS OF CASH FLOWS: 2006 2005
------------------------------------------------ -------- --------
Net cash provided by/(used in):
Total operating activities $ 253 $ 176
-------- --------
Investing activities:
Capital expenditures (560) (395)
Proceeds from sale of assets 11 28
Proceeds from the sale of discontinued
operations - 283
-------- --------
Total investing activities (549) (84)
-------- --------
Financing activities:
Change in debt (12) (470)
Stock repurchase program (750) (2,161)
Other change in stock 139 171
Dividends paid (113) (101)
-------- --------
Total financing activities (736) (2,561)
-------- --------
Cash (paid for) discontinued operations (8) (136)
-------- --------
Net (decrease) in cash and short-term investments (1,040) (2,605)
Cash and short-term investments at beginning of
period 3,016 4,649
-------- --------
Cash and short-term investments at end of period $ 1,976 $ 2,044
======== ========
CONTACT: J. C. Penney Company, Inc.
Investor Relations
Bob Johnson, 972-431-2217
rvjohnso@jcpenney.com
or
Ed Merritt, 972-431-8167
emerritt@jcpenney.com
or
Media Relations
Darcie Brossart or Quinton Crenshaw, 972-431-3400
jcpcorpcomm@jcpenney.com
SOURCE: J. C. Penney Company, Inc.
