JCPenney 2Q Profits Increase, But Conservative on Full Year

In Reports, What's New, Industry News by Accessories Staff

Plano, TX—JCPenney Co. reported today better-than-expected quarterly profits, helped by improved cost controls and its expansion of exclusive brands, and forecast improving sales in its third quarter.

JCPenney reported net income of $14 million, or 6 cents per share, for its second quarter ended July 31, compared to a loss of $1 million, a year earlier. Overall sales fell 0.1% to $3.94 billion, with the drop attributable to the discontinuation of its Big Book catalogs. Internet sales were up 4% to $317 million during the quarter.

Same-store sales rose 1%, the second straight quarterly gain. The company said demand has been helped by its “wear now” strategy to ship some merchandise into stores closer to consumers’ needs. However, gains were partly offset by the company’s same-store sales decline in July, which were hurt by selling clearance inventory at a faster pace and at a “sharper price.”

‘Customers Under Financial Pressure’

For its third quarter, where JCPenney said back to school sales were off to a good start; it expects same-store sales to rise between 2% to 3% and forecast a third-quarter profit of 16 cents to 20 cents a share. Taking a more conservative approach to uncertainly about fall however, the retailer cut its yearly forecast to $1.40 to $1.50 a share from its May projection of $1.64 per share.

Analysts, on average, estimated the company would earn 6 cents a share in the second quarter, 23 cents in the third quarter and $1.54 for the year, according FactSet Research

“We recognize that our customers continue to be under financial pressure,” said Mike Ullman, ceo. “Our focus on operating excellence allowed us to deliver improved profitability in the first half. Moreover, since the beginning of the year, we have been making changes in our merchandise assortments, introducing new brands and offering better style than ever before, in order to increase top line sales.”

The company said the most recent quarter’s results included a 5-cent charge for bond premiums incurred in connection with its debt tender offer completed in May.

JCPenney also hopes to benefit from its recent launches of exclusive brand offerings such as Liz Claiborne, MNG by Mango and Aldo’s Call it Spring labels to its stores. It’s also opening additional Sephora in-store boutiques. Back-to-school selling has been fueled by new brands Uproar and Supergirl by Nastia and exclusive styles like Olsenboye and RS by Sheckler.

U.S. Commerce: July Retail Sales ‘Tepid’

JCPenney’s more conservative approach to its second half sales fell in line with other retailers who cautioned about third and fourth quarter. In another sign of slowing consumer demand, the U.S. Commerce Department said today retail sales rose 0.4% in July, led primarily by car and gasoline sales. This followed a revised 0.3% drop in June figures.

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