|JCPenney Reports First Quarter Results|
|Management Raises Earnings Guidance for Fiscal 2010 |
First Quarter Highlights
PLANO, Texas, May 14, 2010 (BUSINESS WIRE) --J. C. Penney Company, Inc. (NYSE: JCP) reported fiscal first quarter results that were better than initial expectations and showed further improvement in operating income margin. Earnings per share for the quarter ended May 1, 2010, were $0.25 compared to $0.11 per share in last year's first quarter. Net income for this year's first quarter increased 140 percent to $60 million versus $25 million last year.
"The first quarter marked a solid start to the year for JCPenney as customers responded well to the steps we have taken to reinforce our style authority with fashion sensibility, head-to-toe looks and promotions that made what we had to offer highly affordable for America's families. At the same time, the disciplined approach to managing our business allowed us to deliver strong gross margins, even as we work to increase our top line," said Myron E. (Mike) Ullman, III, chairman and chief executive officer of JCPenney.
"We know that our customers remain concerned about their budgets, however they respond well to merchandise that's new and trend-right at compelling prices. Our assortments are strong for the upcoming key appointment shopping periods, including Back-to-School. We will also launch Liz Claiborne(R) in almost 30 merchandise categories and MNG by Mango(R) -- both exclusive to JCPenney -- for the fall. Taken together, the balance of 2010 will be an exciting time for JCPenney as we focus on expanding our market share and delivering long-term growth."
Total sales in the first quarter increased 1.2 percent compared to last year, while comparable store sales increased 1.3 percent. Six of the seven merchandise divisions had sales gains compared with last year's first quarter, with the strongest merchandise results in men's, shoes and handbags, and children's. Geographically, the best performance was in the southeast region of the country. Internet sales through www.jcp.com increased approximately 1 percent versus last year.
For the quarter, gross margin increased 90 basis points to 41.4 percent of sales. SG&A expenses for the quarter increased by $34 million versus last year, primarily due to new store openings and minimum wage increases that have occurred since the first quarter of 2009. Total qualified pension plan expense was $55 million compared to $81 million in last year's first quarter. As a percent of sales, total operating expenses were 37.5 percent in the first quarter, an improvement of 30 basis points compared with last year's first quarter.
Operating income for the first quarter improved 46.2 percent to $155 million or 3.9 percent of sales. Excluding the impact of the non-cash qualified pension plan expense from both the current and last year's first quarter, operating income increased 12.3 percent to $210 million, or 5.3 percent of sales, and adjusted earnings per share were $0.40 versus $0.34 last year. Reconciliations of non-GAAP adjusted operating income and adjusted earnings per share excluding qualified pension expense are included in this release.
Interest expense for the quarter was $59 million, and the effective tax rate was 37.5 percent.
Cash Flow and Financial Condition
The Company continues to maintain a strong financial position, with the flexibility to support long-term growth initiatives and invest in inventory to drive higher sales growth. As of the end of the first quarter, the Company had cash and short-term investments of $2.4 billion, an increase of $240 million over the same period last year, and long-term debt of $3 billion. In March 2010 the Company retired $393 million of maturing long-term debt from existing cash balances.
Capital expenditures for the first quarter were $116 million, in line with expectations. Merchandise inventories ended the first quarter at $3.2 billion, or slightly below last year's first quarter.
Store Renovations and Closings
During the first quarter, JCPenney opened two new stores and separately closed one store bringing the total number of stores to 1,109. The Company also added the highly successful Sephora inside JCPenney concept to 37 existing stores and one new store location bringing the total number of SiJCP locations to 193.
2010 Second Quarter and Full Year Guidance
Management's 2010 second quarter guidance is as follows:
Management's updated full-year 2010 guidance is as follows:
Conference Call/Webcast Details
Management will host a live conference call and real-time webcast today, May 14, 2010, 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 (877) 407-0778 or (201) 689-8565 and reference the JCPenney Quarterly Earnings Conference Call. The telephone playback will be available for seven days beginning approximately two hours after the conclusion of the call by dialing (877) 660-6853, account code 286, and conference ID number 328511. The live webcast may be accessed via JCPenney's Investor Relations page at ir.jcpenney.com, or on www.InvestorCalendar.com and www.streetevents.com (for members). Replays of the webcast will be available for up to 90 days after the event.
JCPenney is one of America's leading retailers, operating 1,109 department stores throughout the United States and Puerto Rico, as well as one of the largest apparel and home furnishing sites on the Internet, jcp.com, and the nation's largest general merchandise catalog business. Through these integrated channels, JCPenney offers a wide array of national, private and exclusive brands which reflect the Company's commitment to providing customers with style and quality at a smart price. Traded as "JCP" on the New York Stock Exchange, the Company posted revenue of $17.6 billion in 2009 and is executing its strategic plan to be the growth leader in the retail industry. Key to this strategy is JCPenney's "Every Day Matters" brand positioning, intended to generate deeper, more emotionally driven relationships with customers by fully engaging the Company's approximately 150,000 Associates to offer encouragement, provide ideas and inspire customers every time they shop with JCPenney.
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, general economic conditions, including inflation, recession, unemployment levels, consumer spending patterns, credit availability and debt levels, changes in store traffic trends, the cost of goods, trade restrictions, changes in tariff, freight, paper and postal rates, changes in the cost of fuel and other energy and transportation costs, increases in wage and benefit costs, competition and retail industry consolidations, interest rate fluctuations, dollar and other currency valuations, risks associated with war, an act of terrorism or pandemic, and a systems failure and/or security breach that results in the theft, transfer or unauthorized disclosure of customer, employee or Company information. 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.
ADJUSTED OPERATING INCOME EXCLUDING QUALIFIED PENSION
The following table reconciles operating income, the most directly comparable GAAP measure, to operating income excluding the impact of the qualified pension plan, a non-GAAP financial measure:
ADJUSTED NET INCOME EXCLUDING QUALIFIED PENSION
The following table reconciles net income, the most directly comparable GAAP measure, to adjusted net income, which excludes the impact of the qualified pension plan, a non-GAAP financial measure:
FREE CASH FLOW The following table reconciles net cash flow from operating activities, the most directly comparable GAAP measure, to free cash flow, a non-GAAP financial measure:
SOURCE: J. C. Penney Company, Inc.
J. C. Penney Company, Inc.
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