It was a very good second quarter for J.C. Penney Co. Inc. and Kohl's Corp., as each posted profit gains from a year ago and raised their outlook for the full year.
Benefiting from a tax credit, J.C. Penney's second-quarter earnings bested Wall Street's expectations, as the retailer saw strength in its women's dresses and casual sportswear businesses.
For the three months ended Aug. 4, income rose 1.7 percent to $182 million, or 81 cents a diluted share, versus $179 million, or 76 cents, a year ago. From a continuing operations standpoint, diluted EPS was 78 cents, or 1 cent better than Wall Street's consensus estimates, versus 75 cents last year. Sales gained 3.6 percent to $4.39 billion from $4.24 billion, while same-store sales rose 1.9 percent. Internet sales through jcp.com jumped 17.4 percent on top of a 24.5 percent gain last year. Total direct sales, which include Internet sales, print and outlet stores, fell by 2.3 percent due to declines in the catalogue business.
For the six months, income increased by 8 percent to $420 million, or $1.85 a diluted share, from $389 million, or $1.65, last year. EPS from continuing operations were $1.82 versus $1.66 a year ago. Sales rose by 3.3 percent to $8.74 billion from $8.46 billion.
"We are proud that we delivered the quarter in a difficult economic environment, an environment we don't expect to get any easier in the third or fourth quarter of this year," said Myron E. "Mike" Ullman 3rd, chairman and chief executive officer of J.C. Penney, in a conference call to Wall Street.
"Our strategies are customer focused, with attention to what America's families want now and in years to come, and we are confident that our business can withstand these cycles and not impede our progress toward our goal of attaining growth leadership in the retail industry....Our customers know they can rely on us as a trusted resource for style [and] quality at a smart price," Ullman said.
The company raised its guidance for full-year earnings from continuing operations to $5.50 a share from its previous estimate of $5.49. For the third quarter, the retailer expects comps to increase in the low-single digits and earnings per share to be $1.28, with fourth quarter EPS of around $2.41.In a telephone interview, Ullman said dress sales were strong in spring, as was the casual sportswear business. The ceo singled out a.n.a. as one brand that had a "good" comparison against last year's debut, while Ambrielle also did well. Sales of Liz & Co. merchandise were "above initial expectations," Ullman said. The retailer is presently getting ready to launch in the spring American Living, a proprietary brand concept it has been working on in partnership with Polo Ralph Lauren Corp.
Bear Stearns analyst Christine Augustine wrote in a research note, "We believe a strong early read on back-to-school sales at [Penney's] should bode well for the second half of 2007. We note that [Penney's] has numerous levers to pull in order to drive operating improvement."
At Kohl's, the retailer said second-quarter income jumped 15.8 percent to $269.2 million, or 83 cents a diluted share, from $232.4 million, or 69 cents, in the same year-ago period. Sales rose by 8.7 percent to $3.59 billion from $3.3 billion, while comps increased 1.3 percent in the quarter.
For the six months, income gained 19.7 percent to $478.2 million, or $1.48 a diluted share, from $399.6 million, or $1.17, a year ago. Sales were up 10.2 percent to $7.16 billion from $6.5 billion.
Larry Montgomery, Kohl's chairman and ceo, said in a statement, "After a strong start to the quarter in May, our sales performance was affected by the performance of our seasonal businesses in June and July. Strength in our other businesses remained consistent and our early read on back-to-school is positive."
The company said it expects diluted EPS for the full year to be between $3.77 to $3.87, compared with previous guidance of $3.75 to $3.87. It also expects third-quarter diluted EPS of 67 cents to 71 cents, and for the fourth quarter, between $1.63 and $1.69.
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