J.C. Penney Co. Inc. on Friday posted a 51 percent slide in fourth-quarter profits, hurt by the curtailment of consumer spending, but the retailer still managed to beat Wall Street’s expectations by 3 cents.
This story first appeared in the February 23, 2009 issue of WWD. Subscribe Today.
The company also told Wall Street it expects to post a first-quarter loss in the range of 20 to 30 cents a share.
For the three months ended Jan. 31, income was $211 million, or 95 cents a diluted share, down from $430 million, or $1.93, in the same year-ago quarter. The Wall Street consensus among analysts was 92 cents. Sales fell 9.9 percent to $5.76 billion from $6.39 billion. Comparable-store sales in the quarter dropped 10.8 percent.
For the year, income declined 48.5 percent to $572 million, or $2.57 a diluted share, from $1.11 billion, or $4.93, in 2007. Sales were down 6.9 percent to $18.49 billion from $19.86 billion.
“Effectively executing our Bridge Plan enabled J.C. Penney to maintain a strong financial position and improve our cash flow metrics, despite the sharp deterioration of consumer spending over the course of 2008,” said Myron E. “Mike” Ullman 3rd, chairman and chief executive officer.
He added that throughout 2008, the company “took steps to significantly reduce our inventories and operating expenses in order to withstand the impact of the economic conditions. At the same time, we stepped up the style we offer and focused on effectively communicating the newness, excitement and value in our merchandise, as well as engaging and enabling our associates to provide a rewarding shopping experience to our customers. Looking ahead, we are dedicated to remaining one of the best capitalized retailers and continuing to show our customers why they should choose J.C. Penney above all others.”
Ullman told Wall Street analysts during a conference call, “We are well positioned to navigate through an economic environment that remains very challenging. By continuing to focus on our Bridge Plan, we’ll be able to handle the near-term pressures. While taking advantage of opportunities, we’ll strengthen our longer-term competitive position.”
Ken C. Hicks, president and chief merchandising officer, said during the call, “J.C. Penney continues to lead in women’s apparel, where our sales trends were once again stronger than our competitors. For the fourth quarter, women’s apparel and family shoes were our best-performing businesses….The fine jewelry division continues to be our weakest business, consistent with others in the industry. For the quarter, jcp.com sales decreased approximately 8.6 percent versus a 13.7 percent increase last year.”
Hicks said the company last year opened 35 new or relocated stores. It also completed significant fixturing and store environment improvements in about 600 stores across the country, as well as 24 major renovations and 90 store refurbishments. The retailer opened 44 Sephora stores inside Penney’s locations in 2008, bringing its total Sephora in-store shops to 91 locations. The current plan is to “accelerate our Sephora openings in 2009 with 64 additional locations planned,” he said.
Hicks also emphasized, “The benefit of our proactive approach on pricing and promotions during December was that we were able to effectively clear through seasonal merchandise, and end the year with a clean inventory position. We ended the quarter with total inventory down 10.5 percent, and aligned with expected sales trends over the near term.”
In addition to the per-share loss it expects in the first quarter, Penney’s projected a first-quarter sales decline of 10 to 13 percent, as well as a comps decrease of 12 to 15 percent.
Mindful of firms’ travel budgets, the retailer said it will host its annual analysts’ meeting in New York on April 22 instead of Plano, Tex., as it has in the past.
The company ended the year with cash investments of $2.4 billion and long-term debt of $3.5 billion. It has no debt maturities in 2009, a $500 million maturity in 2010 that can be retired using existing cash on its balance sheet, and no maturities in 2011.