Penney Posts Strong Quarter

By Anthony Guerra -- Home Textiles Today, 8/22/2005 12:00:00 AM

Plano, Texas —

J.C. Penney Company, Inc. reported sales for its second fiscal quarter rose 5.4 percent, to $4 billion from $3.8 billion last year; while comp-store sales at the retailer rose 4.2 percent.

Income from continuing operations jumped 79.4 percent, to $122 million from $68 million a year ago. Penney attributed the improvement to a strong operating performance coupled with the impact of its common stock buyback program.

All merchandise divisions and all regions of the country contributed sales increases. For the quarter, direct (catalog/Internet) sales increased 7.1 percent versus a 1.6 percent decrease last year, primarily as a result of continued strength in the Internet. Sales for jcpenney.com increased over 30 percent in the quarter in both the current and prior year.

Gross margin improved by 90 basis points to 38.1 percent of sales, reflecting better management of both inventory flow and seasonal transition, as well as continued strength in the performance of the company's private brand merchandise. SG&A expense dollars increased with the higher sales volume but were leveraged, improving by 60 basis points as a percentage of sales.

Operating profit was $213 million, or 5.4 percent of sales, compared with $149 million, or 3.9 percent of sales last year — an increase of 43 percent, or 150 basis points as a percentage of sales.

Myron E. (Mike) Ullman, III, chairman and CEO, said: “We are pleased with progress made to date and are committed to strengthening the customer relationship. We will accomplish this by building our private brands, as well as offering national brands, that our customers — the middle American consumer — want, making it both exciting and convenient to shop with JCPenney. We are entering the third quarter and the back-to-school selling season with momentum and early results have been encouraging.”

Ullman added, “Even as we seek to build and enhance our brand-building and marketing activities, we remain committed to increasing long-term profitability by ensuring efficiency across our organization and continuing to strengthen our financial position. Based on the confidence we have in our long-range plan, we announced a $400 million addition to our common stock repurchase program last month, bringing our total repurchase authorizations to over $4 billion since last August.”

J.C. Penney Company, Inc.