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JCPenney Expects Tough Year

Despite a smaller than expected drop in quarterly profits during the fourth quarter, JCPenney execs last week told analysts they expect 2008 to be challenging year.

"In fact, depending on which economic pundits you listen to, it may get worse before it gets better," chairman and ceo Mike Ullman said.

Gross margin as a percentage of sales are expected to decline and expenses to climb both in the first quarter and for the full year, the retailer said, as it reported full year revenues of $19.86 billion, off 0.2% from $19.90 billion in 2006.

Home continues to show sluggish performance both online and in-store — especially textiles and furniture, executives said. However, in the first few selling days of the new American Living line, home is generating some interest, with window showing particular promise.

For the quarter ended Feb. 2, JCP recorded a net profit of $430 million, down 9.9% from the year-ago period, or $1.93 per share, down 7.7%. The downturn was mitigated in part by cutting pension expenses and executive bonuses, which shaved 11.3% off selling, general and administrative expenses.

Sales for the quarter declined 4.1% to $6.4 billion, with comps down 2.3%.

For the new fiscal year, JCPenney expects earnings per share of $3.75 to $4.00, with EPS of 75-80 cents in the first quarter. Sales are forecast to increase slightly during the first quarter, with an increase in the low single digits for the full year. Comps are expected to decrease in the low-single digits for both the first quarter and full year.

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