|JCPENNEY REPORTS A $168 MILLION INCREASE IN EBITDA FOR THE FIRST QUARTER OF FISCAL 2015 AND RAISES GUIDANCE FOR THE FISCAL YEAR|
Strategic initiatives drove improved performance across key growth categories and jcp.com; EPS improved 52% compared to last year
Opened 23 new Sephora inside JCPenney locations and expanded 6 existing locations, bringing total to 515
PLANO, Texas - (May 13, 2015) - J. C. Penney Company, Inc. (NYSE: JCP) today announced financial results for its first quarter ended May 2, 2015. For the first quarter, JCPenney reported net sales of $2.86 billion compared to $2.80 billion in the first quarter of 2014. Same store sales increased 3.4 % for the period.
Myron E. (Mike) Ullman, III, chief executive officer said, "We are pleased with the Company's solid performance this quarter across all key metrics including sales, gross margin and EBITDA. This year we are switching gears, going on the offensive to gain back share and grow our business profitably while executing our vision to become the preferred shopping choice for Middle America. I would like to thank our team of 114,000 associates for their hard work and warrior spirit that helped us deliver these results. It is their passion to win and to serve the customer that sets JCPenney apart from the competition."
Marvin Ellison, president and CEO-designee, said, "The teams executed extremely well this quarter, resulting in significantly improved performance across the enterprise. It is clear that our strategic initiatives are working to drive profitable sales growth. Our exceptional customer experience, when combined with our strength in private brands, national brands and points of differentiation like Sephora inside JCPenney and the Disney Collection, give us confidence in our ability to earn customer loyalty and deliver on our long term goals. In fact, based on our results to date, including a strong Easter and Mother's Day, we feel confident in raising our 2015 expectations for sales, gross margin and SG&A."
For the quarter, Women's apparel, Men's and Home were the Company's top performing merchandise divisions. Sephora inside JCPenney, which is now available in 515 locations, also continued its strong performance. Geographically, all regions experienced sales growth when compared to the same period last year with the best performance in the western and central regions of the country.
For the first quarter, gross margin improved 330 basis points to 36.4 % of sales, compared to 33.1 % in the same quarter last year.
SG&A expenses for the quarter were down $44 million to $965 million or 33.8 % of sales, representing a 220 basis point improvement from last year. These savings were primarily driven by lower store controllable costs, advertising and improved credit income.
Operating income for the quarter improved 70 % over last year to a loss of $75 million. EBITDA improved by $168 million to $79 million, a 600 basis point or 189% improvement from the same period last year. For the first quarter, the Company incurred a net loss of $167 million or ($0.55) per share, a 52% improvement.
The Company increased its 2015 full-year guidance as follows:
First Quarter 2015 Earnings Conference Call Details
At 4:30 p.m. ET today, the Company will host a live conference call conducted by Chief Executive Officer Myron E. (Mike) Ullman, III, President and CEO-Designee Marvin Ellison and Chief Financial Officer Ed Record. Management will discuss the Company's performance during the quarter and take questions from participants.
To access the conference call, please dial (877) 546-5021, or (857) 244-7553 for international callers, and reference 45705116 participant code or visit the Company's investor relations website at http://ir.jcpenney.com. Supplemental slides will be available on the Company's investor relations website approximately 10 minutes before the start of the conference call.
Telephone playback will be available approximately two hours after the conclusion of the meeting by dialing (888) 286-8010, or (617) 801-6888 for international callers and referencing 64171968 participant code.
Investors and others should note that we currently announce material information using SEC filings, press releases, public conference calls and webcasts. In the future, we will continue to use these channels to distribute material information about the Company and may also utilize our website and/or various social media to communicate important information about the Company, key personnel, new brands and services, trends, new marketing campaigns, corporate initiatives and other matters. Information that we post on our website or on social media channels could be deemed material; therefore, we encourage investors, the media, our customers, business partners and others interested in our Company to review the information we post on our website as well as the following social media channels:
Any updates to the list of social media channels we may use to communicate material information will be posted on the Investor Relations page of the Company's website at www.jcpenney.com
J. C. PENNEY COMPANY, INC.
SUMMARY BALANCE SHEETS
SUMMARY STATEMENTS OF CASH FLOWS
Reconciliation of Non-GAAP Financial Measures
We report our financial information in accordance with generally accepted accounting principles in the United States (GAAP). However, we present certain financial measures and ratios identified as non-GAAP under the rules of the Securities and Exchange Commission (SEC) to assess our results. We believe the presentation of these non-GAAP financial measures and ratios is useful in order to better understand our financial performance as well as to facilitate the comparison of our results to the results of our peer companies. In addition, management uses these non-GAAP financial measures and ratios to assess the results of our operations. It is important to view non-GAAP financial measures in addition to, rather than as a substitute for, those measures and ratios prepared in accordance with GAAP. We have provided reconciliations of the most directly comparable GAAP measures to our non-GAAP financial measures presented.
The following non-GAAP financial measures are adjusted to exclude restructuring and management transition charges, the impact of our qualified defined benefit pension plan (Primary Pension Plan), the net gain on the sale of non-operating assets, the proportional share of net income from our joint venture formed to develop the excess property adjacent to our home office facility in Plano, Texas (Home Office Land Joint Venture) and the tax impact for the allocation of tax expense to other comprehensive income items related to our Primary Pension Plan. Unlike other operating expenses, restructuring and management transition charges, the net gain on the sale of non-operating assets, the proportional share of net income from the Home Office Land Joint Venture and the tax impact for the allocation of tax expense to other comprehensive income items related to our Primary Pension Plan are not directly related to our ongoing core business operations. Primary Pension Plan expense/(income) is determined using numerous complex assumptions about changes in pension assets and liabilities that are subject to factors beyond our control, such as market volatility. Accordingly, we eliminate our Primary Pension Plan expense/(income) in its entirety as we view all components of net periodic benefit expense/(income) as a single, net amount, consistent with its presentation in our Consolidated Financial Statements. We believe it is useful for investors to understand the impact of restructuring and management transition charges, Primary Pension Plan expense/(income), the net gain on the sale of non-operating assets, the proportional share of net income from the Home Office Land Joint Venture and the tax impact for the allocation of tax expense to other comprehensive income items related to our Primary Pension Plan on our financial results and therefore are presenting the following non-GAAP financial measures: (1) adjusted net income/(loss) before net interest expense, income tax (benefit)/expense and depreciation and amortization (adjusted EBITDA); (2) adjusted net income/(loss); and (3) adjusted earnings/(loss) per share-diluted.
In addition, we believe that EBITDA is a useful measure in assessing our operating performance and are therefore presenting this non-GAAP financial measure in addition to the non-GAAP financial measures listed above.
EBITDA AND ADJUSTED EBITDA, NON-GAAP FINANCIAL MEASURES:
The following table reconciles net income/(loss), the most directly comparable GAAP measure, to EBITDA and adjusted EBITDA, non-GAAP financial measures:
ADJUSTED NET INCOME/(LOSS) AND ADJUSTED EARNINGS/(LOSS) PER SHARE-DILUTED, NON-GAAP FINANCIAL MEASURES:
The following table reconciles net income/(loss) and earnings/(loss) per share-diluted, the most directly comparable GAAP measures, to adjusted net income/(loss) and adjusted earnings/(loss) per share-diluted, non-GAAP financial measures:
Reconciliation of Non-GAAP Financial Measures
Free cash flow is a key financial measure of our ability to generate additional cash from operating our business and in evaluating our financial performance. We define free cash flow as cash flow from operating activities, less capital expenditures, plus the proceeds from the sale of operating assets. Free cash flow is a relevant indicator of our ability to repay maturing debt, revise our dividend policy or fund other uses of capital that we believe will enhance stockholder value. Free cash flow is considered a non-GAAP financial measure under the rules of the SEC. Free cash flow is limited and does not represent remaining cash flow available for discretionary expenditures due to the fact that the measure does not deduct payments required for debt maturities, pay-down of off-balance sheet pension debt, and other obligations or payments made for business acquisitions. Therefore, it is important to view free cash flow in addition to, rather than as a substitute for, our entire statement of cash flows and those measures prepared in accordance with GAAP.
FREE CASH FLOW, NON-GAAP FINANCIAL MEASURE:
The following table reconciles cash flow from operating activities, the most directly comparable GAAP measure, to free cash flow, a non-GAAP financial measure:
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