Penney Q2 breaks even
August 18, 2003,
Helped by a continuing rebound in its department store and catalog business, J.C. Penney Co. recorded a break-even second quarter, improving on a year-ago loss of $6 million.
Extending a long-running turnaround, same-store sales in the core department store business grew by 2.1 percent, reversing a year-ago decline of 2.4 percent; and catalog and internet sales grew at an even faster pace, rising by 3.9 percent. All merchandise divisions recorded same-store sales increases during the quarter.
Stronger sales in the core retailing business helped to offset weakness in the Eckerd Drugstore segment, where sales increased a relatively anemic pace of 2.3 percent, well of their usual pace. Eckerd's operating profits slumped by 26.0 percent, to $54 million from $73 million last year.
Giving the department store and catalog profits a much needed lift, in addition to the stronger sales, margins held relatively steady, while costs were whittled down. Average gross margin dipped slightly, by 20 basis points, or two-tenths of a percentage point, to 35.9 percent from 36.1 percent a year ago. But more than offsetting the margin slipping, operating costs improved by 100 basis points, to 34.5 percent of sales from 35.5 percent the prior year.
"As we begin the second half, we anticipate benefits from a more favorable consumer environment supported by the positive impacts that the tax package will have on our customers," said Allen Questrom, chairman and ceo. "We believe our department store and catalog/internet business will continue to improve in the second half, beginning with the Back-to-School selling season."
Second quarter segment results
|DEPT. STORE/CATALOG||2003||2002||% change|
|Average gross margin||35.9%||36.1%||—|
|Average gross margin||23.1%||23.4%||—|
J.C. Penney Co. Inc.
|Qtr. 7/26 (x000)||2003||2002||% change|
a-Second-quarter results include miscellaneous income of $11 million, compared with a year-ago miscellaneous expense of $5 million; and acquisition amortization of $8 million. Compared with $7 million last year; the company incurred no income-tax expense, compared with a $3 million 3 million income-tax provision a year ago.
b- Six-month results include $18 million in miscellaneous income vs. a year-before miscellaneous expense of $15 million; and acquisition amortization of $18 million vs. $17 million a year ago.
|Oper. income (EBIT)||105,000||95,000||10.5|
|Per share (diluted)||(0.02)||(0.05)||—|
|Average gross margin||29.4%||29.7%||—|
|Oper. income (EBIT)||306,000||352,000||-13.1|
|Per share (diluted)||0.18||0.24||-25.0|
|Average gross margin||30.2%||30.1%||—|