JCPenney Profits Rebound
February 28, 2005,
Plano, Texas — Helped by stronger same-store sales, wider margins and lower costs, fourth quarter profits at J.C. Penney Co. Inc. rebounded to $333 million from a year-before loss of $1 billion, when the company struggled with its troubled Eckerd drug store business, since sold off.
Overall sales subsided slightly, by 0.4 percent, nicked by a 1.5 percent drop in catalog and internet sales. But the crucial gauge of same-store sales in department stores improved by 3 percent.
Driving the bottom-line improvement, average gross margin improved by 130 basis points, or 1.3 percentage points, to 37.2 percent from 35.9 percent the prior year.
In a further lift to profits, the retailer whittled down costs, by 100 basis points, or 1 percentage point, to 27.6 percent form 28.6 percent.
Following the sale of the Eckerd drug store business, Penney is in the midst of a share and debt reduction program begun in August 2004. By the end of January, the retailer had repurchased about 50 million shares of its common stock for about $2 billion, and plans to keep on buying through the first half of this year. At the same time, using Eckerd proceeds, the company retired about $1.7 billion of long-term debt. The company is currently sitting on a war chest of $2.5 billion in cash.
J.C. Penney Co. Inc.
|Qtr. 1/29 (x000)||2004||2003||%change|
a. Fourth quarter results include $25 million in real estate and other expenses; and $5 million in after-tax profits from the discontinued Eckerd operation, compared with a prior-year loss of $1.3 billion from discontinued operations. Excluding the sold-off Eckerd operation, earnings from continuing operations rose 29.6 percent, to $328 million from $253 million during the same period a year ago.
b. 12-month results include $47 million in bond premiums and unamortized costs; $12 million in real estate and other expenses, compared with miscellaneous income of $17 million last year; and a $143 million after-tax loss from the discontinued Eckerd operation, compared with a prior-year loss of $1.3 billion. Excluding the sold-off Eckerd business, earnings from continuing operations rose 83.2 percent, to $667 million from $364 million.
|Oper. Income (EBIT)||581,000||445,000||30.6|
|Per share (diluted)||1.17||(3.42)||—|
|Average gross margin||37.2%||35.9%||—|
|Oper. Income (EBIT)||1,312,000||790,000||66.1|
|Per share (diluted)||1.76||(3.13)||—|
|Average gross margin||38.7%||37.2%||—|