• Jennifer Marks

JCP: Home Better, but Still Slack

The first-quarter message from J.C. Penney Inc. echoed former President George W. Bush's assessment that the country was "safer, but not yet safe."

Profits plunged 79.2%, but beat expectations. Comps fell 7.5%, but outpaced plan. The first quarter was better than expected, but the company pegged its full-year profit outlook below Wall Street's forecasts.

The home department is stabilizing, "but we are not prepared to declare victory," president and chief merchandising officer Ken Hicks said during the retailer's quarterly conference call late last week.

JCP's profit was $25 million for the quarter ended May 2, 2009, or 11 cents per share compared to a profit of $120 million, or 54 cents per share, in last year's first quarter.

Sales fell 5.9% to $3.88 billion.

For the second quarter, Penney is forecasting a loss of 15 to 25 cents per share and a sales drop off of 7% to 10%.

For the year, executives last week issued guidance of 50 to 65 cents per share, substantially below the 75 cents analysts had been expecting. JCP expects full-year comps to drop 9%.

"Consumer sentiment is bouncing off the lows," chairman and ceo Mike Ullman told analysts.

In terms of soft home categories, "from time to time we're seeing glimmers of hope, but we're far from seeing the home business in terms of [reflecting] underlining trend," he said.

On the positive side, executives noted that the company is opening stores this year (17 units) while other retailers are closing under-performers, gross margin has improved, and Penney is selling more merchandise at regular promotional prices rather than clearance.

Ullman described the current environment as "a barbell economy." Customers are responding to newness, but remain focused on door-busters.

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