JCPenney Gets Pounce from “Improved” Q4 Report

JCPenney recently reintroduced its former red-and-white logo

Plano, TX—With its better-than-expected fourth quarter report released Wednesday afternoon JCPenney says it’s well on its way to a turnaround with sales increases ahead. Wall Street responded with the department store shares surging 25% in trading today.

While that is still well below the $21.70 of a year ago, JCPenney is reporting results that appear to quell retail analysts’ fears about its future.

For the quarter ended Feb. 1, JCPenney reported a net loss of $206 million, or 68 cents a share, compared with a net loss of $552 million, or $2.51 a share, a year ago. Excluding certain items (but including a pension cost), adjusted loss was 68 cents a share compared with analysts’ average estimate for a loss of 82 cents.

‘Go-Forward Phase’

Net revenue was down 2.6% to $3.78 billion compared with $3.88 billion a year ago. Analysts had forecast $3.85 billion. Comparable store sales rose 2% while online sales jumped 26.3%.

Bestselling categories included home, men’s apparel, women’s accessories and Sephora shops.

Gross margin widened to 28.4% from 23.8% a year ago, but the company said it projected gross margin will improve “significantly” in 2014 on its way back to its historical 39%.

Included in this quarter’s gross margin was the clearance of some merchandise from brands brought in by former CEO Ron Johnson. Exited brands include JCP Men’s, Stafford Prep, JOE by Joseph Abboud, William Rast, Joe Fresh Kids and JCP Everyday. Downsized brands include Joe Fresh in women’s apparel, Michael Graves Design, Conran and several in the home department.

Analysts seemed reassured with JCPenney’s credit, including more than $1.5 billion in chase and $2 billion in total available liquidity.

It’s all the sign that JCPenney’s turnaround is full steam ahead, said Myron “Mike” Ullman, chief executive.

“We also realized this turnaround would come in three phases, the immediate stabilization phase, followed by a phase rebuilding and then the go forward phase positioned JCPenney for long-term growth,” Ullman said. “Over the last 10 months, we completed the first two phases of our turnaround in a very tough and highly competitive environment and this year progressing go-forward phase.”

Good News from SEC

Other positive signs going forward include, JCPPenney’s comparable store forecast for a “mid-single digit” increase in 2014 in addition to the gross margin gains. Revenue is expected to be up 5% with first quarter comparable store sales up 3% to 5%.

According to Morningstar analyst Paul Swinand, Ullman has calmed industry and vendors fears about JCPenney’s future.

“Ullman has done a lot with his leadership and putting a plan in place and carrying it out. When your vendors have confidence in what you’re doing, that gives a retailer a lot of breathing room,” Swinand said.

JCPenney had some other good news on Wednesday, the Security and Exchange Commission’s Fort Worth office said that it had concluded its investigation and was not recommending SEC action regarding JCPenney’s actions about its liquidity, cash position, and debt and equity financing, as well as the company’s underwritten public offering of common stock announced Sept. 26.

 

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Jeff Prine, Editor at Large, Accessories Magazine
Jeff returns as a regular contributor to Accessories magazine. Initially Jeff worked as senior editor at Accessories more than 20 years ago and his love of the industry has followed him until present. Since his tenure here, Jeff has continued to report jewelry, watch and other luxury goods trends as executive editor at Modern Jeweler magazine, fashion director at Lustre, and as contributor on products and trends for consumer and trade publications and websites. In addition to his editorial experience, Jeff also served as an adjunct instructor for accessories merchandising at Fashion Institute of Technology. jeffp@busjour.com

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