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Home sits out Q1 surge at JCPenney

Ullman projects better home business by end of 2010

Plano, Texas -- “I am pleased to report that all the businesses except home had sales gains for the quarter,” said JCPenney chairman and ceo Mike Ullman to analysts on this morning’s first-quarter earnings call.

“We actually look at home as a positive,” Ullman stressed, “because frankly it has languished a bit over the past couple of years and we think there’s upside.” 

In response to an analyst question on the performance of the home division, Ullman said, “There are a number of initiatives in home which have been quite successful over the last several years.” He cited the introduction of Linden Street and also “Cindy Crawford Style, which has resonated very well online as well as in our stores.” 

Ullman continued, “Having said that, I’m not sure that we’ve messaged the price points and the depth of our offer very effectively in the past. I think John Tighe is a very skilled merchant; he and his team are putting together a solid plan -- which I think we’ll see some results in the second half of the year in terms of going after the business.”

JCP just two months ago named Tighe svp, gmm of home.

 "We are seeing pickup now in some of the soft home categories, so I would expect that to continue -- the real question is the balance between online and in-store, and the balance between hard home and soft home,” Ullman pointed out. At JCPenney, window coverings and furniture comprise the hard home categories, which he said are particularly lagging.

On the topic, Ullman summed up, “I would expect clearly by the fourth quarter to start to see a meaningful contribution” from the home departments. Included in that assessment is the oncoming launch of JCP’s exclusive Liz Claiborne lifestyle brand in more than 30 categories across the store, as well as continuing “accretive” gains by JCP’s classic-traditional private brand, American Living.

JCP results were generally above expectations. Net income for the quarter ended May 1, 2010 boomed 140% to $60 million from $25 million in the same period one year ago. Earnings per diluted share of 25 cents in Q1 2010 represented a 127% gain from the year-ago eps of 11 cents.

Sales advanced 1.2% to $3.929 billion, with a comparable store gain of 1.3%. Sales at jcp.com grew by about 1% over the year-ago period, the company said -- and Ullman said that e-commerce gains were “dragged down a bit by our home performance.”

Operating income for the quarter ended May 1, 2010 expanded 46.2% to $155 million from $106 million last year, built on a gross margin gain of 90 basis points, to 41.4% of sales.

SG&A expenses were up 50 basis points, but that was expected in light of recent inflow of fresh inventory after much tightening -- the company entered the quarter with inventory 7% below the year-ago level, and ended the quarter close to 1% below year-ago inventories.

On the strength of its Q1 performance, Penney’s guidance improved for Q2 and the full year. Bob Cavanaugh, evp and cfo, projected a 2.5% to 3% comp gain for the second quarter, with an eps of 10 cents to 13 cents.

For all of 2010, the company now projects low single-digit comp gains and eps of $1.64 -- up from the previous guidance of $1.55 eps.

 

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