JCP doubles 2Q operating profits

Getting a big lift from wider margins and tough expense controls, second-quarter operating profits doubled at JCPenney department stores and catalog, to $22 million from $11 million last year.

But in a punishing retail environment, department store and catalog sales fell by 6.0 percent, to $3.6 billion from $3.9 billion last year, a drop of $232 million, largely due to lower than planned levels of inventory throughout the quarter, the retailer said. Same-store sales declined by 2.4 percent. Bucking the trend of lower sales, said Penney, were two stand-outs, home and fine jewelry, which both generated sales gains.

A big disappointment was catalog, where sales dropped off by 21.4 percent. Even so, changes in policies and programs led to an improvement in catalog's profit contribution, the retailer said.

Driving the big improvement in department store and catalog operating profits, average gross margin strengthened by 290 basis points, to 36.1 percent from 33.2 percent the previous year. At the same time, expenses were held in check and virtually flat, inching up just 1.3 percent, to $1.3 billion, despite higher advertising and pension costs and transition costs for a new distribution network.

"Despite weaker than expected department store sales, gross margin is benefiting from a better buying process under the new centralized merchandising model," said Allen Questrom, Penney chairman and ceo.

JCPenney Co. Inc.

Qtr. 7/27 (x000) 2002 2001 % chg
Average gross margin and SG&A expenses are calculated as a percentage of department store and catalog sales.
a-Total sales, including $3.6 billion in Eckerd Drug Store sales, up 6.5 percent from $3.4 billion last year.
b-Results include $7 million in unallocated expenses, compared with $11 million last year; acquisition amortization of $92 million, compared with $94 million last year; a $2 million net restructuring credit, compared with a year-ago charge of $7 million; and an income-tax credit $3 million, compared with $33 million a year ago. The prior-year period included a $16 million after-tax loss on the sale of discontinued operations. Six-month results include $15 million in unallocated expenses vs. $6 million in unallocated income a year ago; acquisition amortization costs of $17 million vs. $56 million; and a $46 million income-tax credit vs. a $6 million tax expense last year. Prior-year results included a $16 million loss on the sale of discontinued operations.
Sales $7,198,000a $7,211,000a -0.2
Oper. income (EBIT) 95,000 47,000 102.1
Net income (6,000)b (69,000)b
Per share (diluted) (0.05) (0.23)
Average gross margin 36.1%c 33.2%c
SG&A expenses 35.5%c 32.9%c
Six months 2002 2001 % chg
Sales 14,926,000 14,733,000 1.3
Oper. income (EBIT) 352,000 236,000 49.2
Net income 80,000b (28,000)b
Per share (diluted) 0.24 (0.10)
Average gross margin 37.0%c 34.6%c
SG&A expenses 34.6%c 32.8%c

Department Store and Catalog Results (three months)

2002 2001 % chg
Sales 3,623,000 $3,855,000 -6.0
Same-store sales -2.4
Operating profit 22,000 11,000 100.0
Six months 2002 2001 % chg
Sales 7,629,000 7,917,000 -3.6
Same-store sales 2.5
Operating profit 179,000 144,000 24.3

Home & Textiles Today Staff | News & Commentary

 Home Textiles Today is the market-leading brand covering the home and textiles markets, offering a comprehensive package of print and online products. Home & Textiles Today provides industry news, product trends and introductions, exclusive industry research, consumer data, store operations solutions, trade show news and much more.

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