By  on February 19, 2010

Myron E. “Mike” Ullman 3rd is looking for sales growth to resume this year even as he sticks to a measured promotional strategy.

The J.C. Penney Co. Inc. chairman and chief executive officer on Friday detailed the company’s 2009 results, which were capped by lower sales and a 5.2 percent profit decline in the fourth quarter.

Penney’s is projecting a low-single-digit increase for comparable-store sales this year, but Wall Street analysts on the firm’s quarterly conference call were skeptical. BMO Capital Markets analyst Wayne Hood told Ullman he was asking analysts to take a “leap of faith” and pushed for more details on how the company would reverse its sales trend so quickly.

But the retail veteran defended the outlook, pointing to the upcoming introductions of the Liz Claiborne and MNG by Mango brands, as well as the expansion of the Sephora concept to 75 additional doors this year from its current level of 155, as auguring well for the retailer’s top line. He also said Penney’s move to fewer price promotions last year helped position it for growth even if it hurt sales, a point disputed by some analysts.

“They’ve been defining us as having somehow lost in the game of comp-store increases over the last year when, in fact, that was our plan,” Ullman told WWD. “To add promotions in a recession, the only logic would be the desire to drive volume at all costs. Some of our competitors actually added layered discounts in this environment.”

Penney’s comps fell 4.5 percent in the fourth quarter and 6.3 percent last year, but the company is looking for first-quarter comps to be flat to slightly positive. The firm also said 2010 earnings would rise to about $1.55 a share, better than the $1.45 analysts expected, and investors pushed up the stock $1.70, or 6.6 percent, to $27.66.

Penney’s ability to hold its own will become clearer this week as rival Kohl’s Corp., Nordstrom Inc., Macy’s Inc., Target Corp., Saks Inc., Gap Inc. and others report results. Wal-Mart Stores Inc., in its 2009 report last week, expressed disappointment in its apparel business and said it was reviewing its merchandising strategy.

“We’re counting on no change in consumer behavior,” Ullman said. “There’s nothing fundamentally that would make the consumer feel there is a need to spend. If you have the right thing at the right price — we’ll earn the business.”

Ullman, who is also a board member of Dallas’ Federal Reserve Bank, said the top quarter of the consumer spectrum had bounced back some, while the bottom quarter is still working to meet basic needs, shopping for fuel and food.

The 50 percent of consumers in the middle — Penney’s sweet spot — typically have jobs, but are concerned about employment, he said. “It’s not like they have a strong desire to go out and spend, but they have the wherewithal if it’s something they like,” he said.

“It’s very plausible that they can hit their sales objectives depending upon where demand is in the back half of the year,” said BMO’s Hood in an interview. “Because it requires such a marked acceleration in comp-store sales growth from the current trend, there’s a certain degree of skepticism that they can achieve that without more details.”

The Plano, Tex.-based firm’s net income fell to $200 million, or 84 cents a share, from $211 million, or 95 cents, a year ago. Results topped the 77 cents to 82 cents the company previously predicted and the 82 cents Wall Street had penciled in. Sales for the quarter ended Jan. 30 dipped 3.6 percent to $5.55 billion from $5.76 billion.

For the full year, Penney’s net income fell 56.1 percent to $251 million, or $1.08 a diluted share, from $572 million, or $2.57, in 2008. Sales fell 5 percent to $17.56 billion from $18.49 billion.

Penney’s will outline a new five-year plan at its analysts’ meeting in April.

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