JCPenney Profits Rebound

By Don Hogsett -- Home Textiles Today, 2/28/2005 12:00:00 AM

Plano, Texas — —

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.

Pull Eckerd results out of the picture last year, and the improvement remains dramatic, with earnings from continuing operations shooting up 29.6 percent, to $328 million from $253 million a year ago.

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.