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JCP's Bed and Bath Biz Making Strides in 2Q

J. C. PenneyPLANO, TEXAS - Soft home is showing "new signs of life" at J. C. Penney Company Inc., as a revamp of the business under new leadership is paying off in bedding and bath.
     During the 1,107-unit department store's second quarter earnings call last week. chairman and ceo Mike Ullman credited JCP's recently appointed svp and general merchandise manager of home, John Tighe, and his team with "doing a very good job of getting [home] more organized in a more logical manner."
     Ullman singled out some of soft home's recent highlights, including increasing "tracks" in the more affordable items, new product innovations" such as the Pure Perfection towel - a product made by Abhishek Industries Ltd.'s Trident Group home textiles division - "which has done really well." Also helping home is the recent realignment of JCP's bedding business, he said.
     "So the soft home part of our business is starting to respond," Ullman continued. "The stores are very enthusiastic about what they saw for fall.
     At our recent store managers' meeting, one of the most well-received sessions was the powering up of big, bold statements in soft home."
     Soft window coverings and furniture were less successful during the quarter. But both categories are reworked in hopes of improved performance.
     "We think the big ticket furniture and window coverings businesses will respond more slowly," Ullman warned. "I think the reality of the housing slump protracted the vision. We think it is going to take another six months to see the full benefit of the changes they are making. But we're starting to see signs of life in certain areas. We always look to our sales associates because they are always the best customers we have and the best authority on how we are doing, and they feel very good about what they see on the floor."
     JCP had other reasons to feel optimistic about its second quarter. For the period, ended July 31, net income improved to $14 million dollars or 6 cents per share compared to break-even earnings per share in last year's second quarter. Earnings for the second quarter include a charge of approximately 5 cents per share for bond premiums related to the company's debt tender offer completed in May.
     Total sales in the second quarter were about flat, decreasing 0.1%, compared to the year-ago period, having been negatively impacted by approximately 160 basis points due to the discontinuation of the company's Big Book catalogs this year. Internet sales through jcp.com were $317 million in the second quarter, up 4%.
    Comparable-store sales were positive for the second consecutive quarter, increasing approximately 1% from last year.
     The strongest merchandise results were in men's apparel and women's accessories, and geographically, the best performance was in the Northeast.
     Citing a skittish consumer, JCPenny cut its full-year earnings guidance to a range of $1.40 to $1.50 per share. It had previously forecast EPS of $1.64.
     For the third quarter, the company expects a comp increase of 2% to 3%. With gross margin rate anticipated to fall back slightly, EPS is projected to be 16 cents to 20 cents.

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