JC Penney Reports Profitable Trends

By Don Hogsett -- Home Textiles Today, 11/13/2006 12:00:00 AM

Plano, Texas —

Buoyed by stronger sales and wider margins, third-quarter profits at JC Penney jumped up by 22.6% to $287.0 million from $234.0 million last year.

Sales improved by 6.7% to $4.8 billion from $4.5 billion last year, helped by back-to-school selling and new product launches. Same-store sales increased by 5.2%.

"Furniture and window coverings are still the weakest of the home categories," chairman and ceo Mike Ullman told analysts last week, but noted their underperformance was more than made up for by the company "doing exceedingly well in soft goods across the store, including soft home."

"Our private label and exclusive brands are growing in importance, clearly differentiating JC Penney in the eyes of the consumer," said Ullman. He noted that Studio, the latest addition to the private brand JC Penney Home collection, is doing "very, very well -- addressing the opportunity that our customers said that we had in our updated home merchandise assortment."

Sales at JC Penney department stores increased by 7.0%, improving on a 3.0% increase during the same period a year ago. Department store comps grew by 5.2%, doubling the year-ago gain of 2.5%. Direct-to-consumer sales grew by 5.3%, reversing a year-ago decline of 0.9%.

Ullman said the reaction has been good to the intro of the Sephora cosmetics line.

Bolstering the bottom line, in addition to stronger sales, Penney bulked up average gross margin by 80 basis points, or eight-tenths of a percentage point, to 42.6% from 41.8% a year ago.

Looking ahead to the all-important Christmas selling season, the company forecast department-store comps to grow in the low single digits, and raised its fourth-quarter earnings estimate to $1.94 per share.

J.C. Penney Co. Inc