The better-than-expected first quarter results helped lift the retailer’s stock 5% in trading early morning today.
Net income for the quarter ended April 30 increased to $64 million, or 28 cents a share, from $60 million, or 25 cents, earned in the same period a year earlier. Quarterly sales rose 0.4% to $3.94 billion, reflecting its closing of its catalog business. Analysts’ average estimate expected earnings of 26 cents on sales of $3.95 billion.
Comparable sales increased 3.8% driven the company said, by its exclusive such as Liz Claiborne, Worthington and St. John’s Bay as well as ongoing growth of Sephora inside jcpenney, MNG by Mango, Call It Spring and the successful introduction of Modern Bride.
Raises Full Year Profit Outlook as Cost Cutting Continues
“We are successfully implementing our merchandising initiatives, with strong gains in both our men’s and women’s apparel businesses,” Myron “Mike” E. Ullman III, chairman, said in a statement. “Additionally, the steps we have taken to manage our expenses position us to increase the flow-through of sales to the bottom line.”
While the department store also raised its full-year outlook, the company expects to additional restructuring charges throughout the year to make operations more efficient. In the first quarter, the company closed a call center and a custom decorating fabrication center as it exits its catalog business.
JCPenney took a $3 million charge in the first quarter and expects additional restructuring charges of $12 million in the second quarter, $20 million in the second half of this year and $15 million next year.
JCPenney’s gross margin narrowed 0.9 percentage point, to 40.5%, hurt by some free shipping offers and the absence of its Big Book catalog. Selling, general and administrative expenses as a percentage of sales fell 0.4 of a point, to 32.5%. Non-cash qualified pension plan expense tumbled 60% to $22 million.
The company also said it would cut marketing expenses and would continue driving sales with new exclusives such as Liz Claiborne and Sephora shops in its 1,100 department stores. The cost cutting measures are seen as part of the company’s promise a year ago to reach profits of $5 a share by 2014.
“Our ability to deliver on our objectives in the first quarter reflects the progress we are making in executing the Long Range Plan for growth we announced in April 2010,” said Ullman.
The company raised its full-year profit forecast by 15 cents a share, to a range of $2.15 and $2.25. JCPenney spent $900 million buying back its own stock, which lifts future earnings. Analysts’ average estimate forecast profits of $2.04 a share for the year.
For its second quarter, JCPenney forecast profits of 20 cents to 24 cents and expects same store sales increase to be 3% to 4%.