Consumers might still be uneasy, but Myron E. “Mike” Ullman 3rd, J.C. Penney Co. Inc.’s chairman and chief executive officer, said his confidence is growing — despite the company’s $1 million second-quarter loss and 7.9 percent sales decline.
This story first appeared in the August 17, 2009 issue of WWD. Subscribe Today.
“We’ve seen the volatility of our business narrow, and this stabilization has enabled us to be more thoughtful in planning our business,” Ullman told analysts on a conference call Friday. “We’re more confident coming into the third quarter than we were in the second quarter, albeit overall consumer demand is still lagging.”
Ullman said the company’s average unit retail price would be on par with a year ago in the second half.
Penney’s projected third-quarter results would range from a loss of 5 cents a share to earnings of 5 cents a share — worse than the profits of 14 cents a share analysts were expecting. The vast majority of the company’s expected profits for the year are slated to come in the all-important fourth quarter, which includes the holiday season.
“Consumers still have a lot on their minds,” said Ullman, who also sits on the board of the Federal Reserve Bank of Dallas. “Overriding concerns about the future of health care and the timing of an economic recovery continues to create uncertainty and angst from the consumers who realize that they may need to save more than they had originally planned. Their spending habits have changed to reflect this for the foreseeable future in our opinion.”
Penney’s loss in the second quarter, which translated to a breakeven performance on a per share basis, was better than the 1-cent deficit analysts’ predicted. Results compared with year-ago earnings of $117 million, or 52 cents a share. And sales for the quarter ended Aug. 1 slipped to $3.94 billion from $4.28 billion.
The company’s strongest results came in shoes and women’s apparel, where the Polo Ralph Lauren Corp.-produced American Living, A.n.a. and Worthington brands were key drivers. California was particularly strong and the Southwest — stripped of competition from the now-liquidated Mervyns — was Penney’s best-performing region.
For the first half, earnings fell 89.9 percent to $24 million, or 11 cents, on a 6.9 percent decline in sales to $7.83 billion.
The company boosted its guidance for the full year to earnings of 75 cents to 90 cents a share, up from the 50 cents to 65 cents previously projected. The new range is more in line with the 89 cents analysts had projected for the year.
But company is still taking a cautious path forward. Capital expenditures are projected to fall to about $400 million next year from $600 million this year.
Shares of the firm declined 6.2 percent to $31.29 Friday.