Penney triples operating profits

By Staff -- Home Textiles Today, 8/17/2004 12:00:00 AM

PLANO, Texas — Shucking off a money-losing drug store business and returning to its traditional retailing roots, J.C. Penney Co. Inc. parlayed a powerhouse trifecta of stronger margins, lower costs and a big rise in same-store department-store sales into a big lift in operating profits, which virtually tripled during the second quarter.

Sales were strong across the store and in all merchandise divisions, according to Vanessa Castagna, president of JCPenney stores, catalog and internet. Home got an added boost from the May introduction of the captive brand Chris Madden Home for JCPenney Home Collection, she noted during a conference call with analysts this morning.

In addition, home has also shown itself to be a solid performer in what is shaping up to be a strong back-to-school launch during the first two weeks of August, she said.

New up for home: The September launch of a co-branded wedding and gift registry with Colin Cowie.

"The new registry as well as an exclusive entertaining and bridal collection is in the process of being rolled out to 500 stores," Castagna said.

Overall, JCP's results beat its prior guidance. Excluding ongoing losses and costs at the sold-off Eckerd drug store business, Penney extended its recent turnaround, driving operating profits up 194.3 percent, to $156 million from $53 million a year ago.

But saddled with a $71 million after-tax loss at the discontinued Eckerd operation, Penney recorded a smaller net income of $1 million, virtually unchanged from a breakeven quarter the year before. The $71 million after-tax loss from discontinued operations includes Eckerd's operating loss as well as adjustments to reflect the final terms of the sale.

Driving the strong operating results, Penney pushed sales in its core retailing business up 5.8 percent, to $3.9 billion from $3.6 billion a year ago. Same-store sales in department stores climbed a hefty 7.1 percent, a big improvement over last year's 2.3 percent gain. But same-store sales in the catalog and Internet business slipped 1.6 percent following a 3.9 percent increase the preceding year.