JCP doubles 2Q operating profits

Staff -- Home Textiles Today, 8/26/2002 12:00:00 AM

PLANO, TX —

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.

Department Store and Catalog Results (three months)