|JCPENNEY REPORTS POSITIVE NET INCOME FOR FISCAL 2016; A $514 MILLION INCREASE COMPARED TO THE PRIOR YEAR|
Operating Income Grew $292 Million in Fourth Quarter and $484 Million for Full Year
Company Achieves $1 Billion in EBITDA for Full Year; a $477 Million Improvement
PLANO, Texas - (Feb. 24, 2017) - J. C. Penney Company, Inc. (NYSE: JCP) today announced financial results for its fiscal fourth quarter and full year ended Jan. 28, 2017. Comparable store sales were (0.7) % for the fourth quarter and flat for the full year. On a two-year stack basis, comparable sales grew 3.4 % and 4.5 % for the fourth quarter and full year, respectively. The Company delivered a $514 million improvement in net income for the full year.
Marvin R. Ellison, chairman and chief executive officer, said, "We are pleased that in the face of a very challenging 2016 retail environment we delivered our first positive net income since 2010. As recent as 2013, JCPenney reported a net loss of nearly $1.3 billion, or ($5.13) per share, and negative EBITDA of $641 million. This year, we delivered positive net income and generated EBITDA of over $1 billion. This is a reflection that the growth initiatives we laid out at our analyst meeting are working. These initiatives drove significant category growth in the fourth quarter, and provide us a platform to build upon in the years to come. Although our quarter was negatively impacted by the first three weeks of November, we are pleased that we delivered positive sales comps in the combined December and January period. We also saw record online performance over the holiday season, and with our continued focus on improved site functionality, expanded and enhanced fulfillment and continued growth in our assortment, we know this will allow us to deliver significant growth in the digital business."
Ellison continued, "This year was not without its challenges, particularly in our women's apparel business, but I am proud this team delivered on our goal to return our company to profitability in 2016. This is no small feat when considering the situation a few years ago, but our over 100,000 associates embraced our strategy and came to work each day focused on doing their part to drive this incredible turnaround in profitability."
Fourth Quarter Results
JCPenney reported net sales of $4.0 billion in the fourth quarter of 2016 and 2015. Comparable store sales were (0.7) % for the quarter.
Home, Sephora, Salon and Fine Jewelry were the Company's top performing merchandise divisions during the quarter. Geographically, the Southeast and Pacific were the best performing regions of the country.
For the fourth quarter, gross margin was 33.1 % of sales, a 100 basis point decline compared to the same period last year. Gross margin was impacted primarily by increased promotional activity during the quarter, coupled with the continued growth in both online and major appliances.
SG&A expenses for the quarter were down $37 million to $925 million, or 23.4 % of sales, representing a 70 basis point improvement from last year. These savings were primarily driven by lower incentive compensation and store controllable costs.
For the fourth quarter, the Company delivered a $323 million improvement in net income over the prior year to $192 million or $0.61 per share. Adjusted earnings improved $81 million to $0.64 per share for the fourth quarter this year compared to $0.39 per share last year. Adjusted earnings excludes charges primarily associated with restructuring costs, supplemental retirement plans mark-to-market adjustments and the tax impact resulting from other comprehensive income allocation.
EBITDA improved $288 million to $427 million for the quarter, including the $62 million gain on the home office sale, a 207 % improvement from the same period last year. Adjusted EBITDA for the quarter improved $68 million or 18 % to $449 million.
Full Year Results
For the full year 2016, JCPenney reported net sales of $12.5 billion compared to $12.6 billion in 2015, a (0.6) % decrease. Comparable store sales were flat for the year.
For the year, gross margin decreased 30 basis points to 35.7 % from 36.0 % in the prior year.
SG&A expenses for the full year decreased $237 million to $3.5 billion, or 28.2 % of sales, representing a 170 basis point improvement from last year. These savings were primarily driven by lower incentive compensation, store controllable costs, lower corporate overhead and more efficient advertising spend.
For the full year, the Company delivered a $514 million improvement in net income over the prior year to $1 million or $0.00 per share compared to ($1.68) per share last year. Adjusted earnings per share improved to $0.08 per share for the year compared to ($1.03) per share last year.
EBITDA improved $477 million, including the $62 million gain on the home office sale, to $1.0 billion for the year, a 91 % improvement compared to last year. Adjusted EBITDA for the year improved $294 million to $1.0 billion, a 41 % improvement versus last year.
Inventory at year-end was $2.85 billion, an increase of 4.9% compared to last year-end. Approximately 370 basis points of the increase was driven by floor samples for appliance showrooms and higher inventory levels to support the Company's continued investment in new Sephora shops. Other basic replenishment inventory accounted for an additional 260 basis points of the increase in inventory. These increases were partially offset by decreases in fashion and seasonal apparel and other inventory levels.
A reconciliation of GAAP to non-GAAP financial measures is included in the schedules accompanying the consolidated financial statements in this release.
The Company's 2017 full year guidance, which includes the expected impact of store closures, is as follows:
 A reconciliation of non-GAAP forward-looking projections to GAAP financial measures is not available as the nature or amount of potential adjustments, which may be significant, cannot be determined at this time.
(Editor's Note: This morning, JCPenney, Inc. also issued a separate news release announcing plans to optimize retail operations, advance growth and drive profitability)
Fourth Quarter and Full Year Earnings Conference Call Details
Telephone playback will be available for seven days beginning approximately two hours after the conclusion of the conference call by dialing (855) 859-2056, or (404) 537-3406 for international callers, and referencing 66598627 conference ID.
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 mark-to-market adjustment for supplemental retirement plans, the loss on extinguishment of debt, 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 resulting from other comprehensive income allocation. Unlike other operating expenses, restructuring and management transition charges, the loss on extinguishment of debt, 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 resulting from other comprehensive income allocation are not directly related to our ongoing core business operations. Primary Pension Plan expense/(income) and the mark-to-market adjustment for supplemental retirement plans are 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 mark-to-market adjustment for supplemental retirement plans, the loss on extinguishment of debt, 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 resulting from other comprehensive income allocation 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:
1. Reflects no tax effect due to the impact of the Company's tax valuation allowance.
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, as well as information regarding net cash provided by/(used in) investing activities and net cash provided by/(used in) financing activities:
View Stock Chart
Replication or redistribution of EDGAR Online, Inc. content is expressly prohibited without the prior written consent of EDGAR Online, Inc. EDGAR Online, Inc. shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.
jcpenney now offers shareholders electronic delivery of the Summary Annual Report, Form 10-K and Proxy Statement over the Internet. Enroll