J.C. Penney Co. Inc. chief executive officer Myron E. “Mike” Ullman 3rd — his voice gravely following a car accident last week — told WWD that Penney’s was not betting on a consumer rebound this year, but was relying on newer offerings and a “stepped-up” style message to carry the fourth quarter’s 4.5 percent comparable-stores sales gain into 2011.
This story first appeared in the February 28, 2011 issue of WWD. Subscribe Today.
Fourth-quarter profits shot up 35.5 percent and adjusted results inched past analysts’ estimates. But investors fixated on conservative first-quarter projections, which called for adjusted earnings of 21 cents to 26 cents a share, less than the 31 cents Wall Street expected. That pushed the stock down 6.5 percent to $34.16.
Ullman shrugged off a single day’s worth of stock declines and said the firm, which last year became the exclusive department store chain for Liz Claiborne, MNG by Mango and Call It Spring by the Aldo Group, was on the upswing and ready to handle the higher raw material costs working their way through the supply chain.
“We’ve been doing price testing for quite a long time,” Ullman said. “We know we deal with a consumer that’s very cost conscious, price conscious so we need to maintain sharp prices at the opening price point.”
He said shoppers would pay up for more aspirational fashions.
“It’s being selective about when you want to be at the sharpest price point,” he said. “Even when they’re somewhat more elevated, our price points are still extremely competitive, so we’re not overly concerned.”
In general, he said consumers are being cautious except around holidays.
Fourth-quarter net income rose to $271 million, or $1.13 a diluted share, from $200 million, or 84 cents, a year earlier. Sales for the quarter ended Jan. 29 rose 2.8 percent to $5.7 billion from $5.55 billion. Adjusted earnings of $1.09 a share topped analysts’ expectations by 1 cent.
The company’s board also approved a $900 million program to buy back its own stock. New to the board are activist investor William Ackman and Vornado Realty Trust chairman Steven Roth, who collectively control more than 26 percent of the company’s stock.
Ullman said Ackman and Roth had “assimilated quite well” and had a “good start” on the board.
It was after a dinner with the board that the car in which Ullman was a passenger was hit by another car.
“I’m a little beat up, but I’ll be fine,” he said. “I sound worse than I am.”