By  on February 25, 2005

NEW YORK — If retailing is suddenly a real estate game, J.C. Penney Co. is more than ready to play.

The company on Thursday reported a 66 percent leap in operating profits for 2004 and executives said during a conference call to discuss the results that, with $2.5 billion in cash, J.C. Penney has enough resources to be “very aggressive” should the right real estate locations become available.

Penney’s is mentioned as a possible buyer for any stores disposed of as a result of any merger between Federated Department Stores and May Department Stores, or if Saks Inc. decides to spin off some of the stores in its Saks Department Stores division.

For the three months ended Jan. 29, income was $333 million, or $1.17 a diluted share, compared with a loss of $1.07 billion, or $3.42, in the same quarter a year ago. Income from continuing operations was $328 million, or $1.16 a diluted share, versus $253 million, or 83 cents, in 2003. Penney’s in 2004 completed the sale of its Eckerd business.

Based on continuing operations, the retailer beat analysts’ consensus estimate of $1.11 a share by five cents. Sales fell by 0.4 percent to $6.07 billion from $6.10 billion, while comps at its retail stores gained 3 percent.

“Our results reflect the impact of effective merchandising programs, including transition of seasonal product, compelling marketing and continued improvement in the shopping experience in our stores,” Myron “Mike” Ullman, who in December succeeded Allen Questrom as chairman and chief executive officer, said in a statement. Last year “was a breakout year.”

Questrom had spearheaded many of the retailer’s cost-cutting initiatives.

Penney’s ratios as a percent of sales also showed improvement: Operating profit was 9.6 percent compared with 7.3 percent a year ago; gross margin was 37.2 percent versus 35.9 percent, and selling, general and administrative expenses decreased to 27.6 percent from 28.6 percent.

Robert Buchanan, analyst at A.G. Edwards & Sons Inc., concluded in a research note, “On the strength of anticipated further improvement in important facets of the [business], we look for J.C. Penney under new ceo Mike Ullman to continue to improve.” Buchanan has a “buy” rating on the stock.

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