J.C. Penney Company, Inc. (JCP) Loss Narrower than Expected, Widens Y/Y


J. C. Penney Company Inc.’s (JCPAnalyst Report) endeavors to recoup and give itself a major facelift seem to be paying off well as it posted a narrower-than-expected loss for the third quarter of fiscal 2013. The company delivered a loss of $1.81 per share that fared better than the Zacks Consensus Estimate of loss of $1.86, but widened from a loss of 93 cents in the year-ago quarter.

The company has taken several strategic initiatives to drive traffic and conversion, and to better compete with its peers, Macy’s Inc. (MAnalyst Report), Target Corp. (TGTAnalyst Report) and Kohl’s Corp. (KSSAnalyst Report). The company reverted to promotions, which could be a successful sales driver this holiday season but chances of hurting margins cannot be ignored.

Shares of J. C. Penney jumped approximately 10% to $9.58 during pre-market trading hours.

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Including one-time items, the quarterly loss came in at $1.94 compared with a loss of 56 cents in the prior-year quarter.

The quarterly sales of this Zacks Rank #3 (Hold) stock tumbled 5.1% year over year to $2,779 million and also fell short of the Zacks Consensus Estimate of $2,794 million. Comparable-store sales also decreased 4.8% but showed a sequential improvement of 710 basis points. Online sales via jcp.com surged 24.5% to $266 million from the prior-year quarter.

Women’s and men’s apparel, and fine jewelry were the best performing categories during the quarter. J. C. Penney also unveiled 30 new Sephora stores, bringing the count to 446.

Earlier this month, CEO Myron Ullman announced upbeat comparable-store sales results for the month of October. Comparable-store sales rose 0.9%, increasing 490 basis points from September. The Plano, Texas-based retailer announced that sales on jcp.com for the month under review increased 37.6% year over year on the back of constant improvement in the company’s online platform.

Gross profit plummeted 14% to $819 million, whereas gross profit margin contracted 300 basis points to 29.5%, signifying lower clearance margins and promotional pricing to clear inventory. However, gross margin improved 10 basis points sequentially.

J. C. Penney’s adjusted operating loss significantly widened during the quarter and came in at $354 million compared with an adjusted loss of $277 million in the year-ago quarter.

Other Financial Details

J. C. Penney ended the quarter with cash and cash equivalents of $1,227 million, long-term debt of $4,845 million and shareholders’ equity of $2,647 million. The company incurred capital expenditures of $161 million.


J. C. Penney now anticipates gross margin and comparable-store sales to improve year-over-year as well as sequentially during the fourth quarter of fiscal 2013. Management now projects capital expenditure of $175 million for the quarter and expects to have a liquidity of over $2 billion at the end of the year.