Exhibit 99.1
JCPenney News Release
CONTACT
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<c> <c> <c> <c>
Rita Trevino Flynn Tim Lyons Eli Akresh Bob Johnson
Public Relations Public Relations Investor Relations Investor Relations
(972) 431-4753 (972) 431-4834 (972) 431-2207 (972) 431-2217
rflynn@jcpenney.com tmlyons@jcpenney.com eakresh@jcpenney.com rvjohnso@jcpenney.com
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JCPENNEY REPORTS SECOND QUARTER EARNINGS
Department Stores and Catalog Operating Profits Double
Catalog/Internet Performance Improves
Financial Condition Remains Strong
PLANO, TX, August 12, 2003 -- J. C. Penney Company, Inc. (NYSE: JCP) today
reported a second quarter loss of $0.02 per share compared with a loss of $0.05
per share in last year's quarter.
Allen Questrom, Chairman and Chief Executive Officer said, "I am pleased
with the rebound in Department Stores and encouraged by the turnaround in
Catalog/Internet sales. Eckerd's sales and operating profits were clearly
disappointing. As we begin the second half, we anticipate benefits from a more
favorable consumer environment supported by the positive impacts that the tax
package will have on our customers. We believe our Department Store and
Catalog/Internet business will continue to improve in the second half, beginning
with the back-to-school selling season. This improvement reflects greater
experience working with our centralized business model, and delivering a more
compelling value to both Department Store and Catalog/Internet customers. At
Eckerd, we are making changes to improve the business, but recognize that it
will take time for these changes to register with our customers. Accordingly,
Eckerd's operating profits are likely to be below last year's level in the third
quarter, and about equal to last year's profit in the fourth quarter. On a
consolidated basis, we currently expect third quarter earnings to be in the
range of $0.25 to $0.30 per share, and the full year to be in the range of $1.25
to $1.35 per share."
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Department Stores and Catalog
Second quarter LIFO operating profit more than doubled to $51 million
compared with $22 million last year, an increase of 80 basis points as a percent
of sales. Comparable department store sales increased 2.1 percent in a
challenging retail environment. All merchandise divisions had comparable store
sales increases. Catalog/Internet sales increased 3.9 percent, representing the
first quarterly sales gain in three years. Sales benefited from improved print
media, including a positive early customer response to the Fall/Winter Big Book.
In addition, Internet sales continue to experience strong growth, increasing by
more than 60 percent during the quarter and 40 percent year-to-date.
Department Stores and Catalog gross margin decreased by 20 basis points as
a percent of sales, reflecting a more aggressive merchandise clearance strategy.
Comparable department store inventory levels increased about three percent over
last year, and are balanced and in line with current sales expectations. SG&A
expense dollars were $22 million lower than last year, and were leveraged,
improving by 100 basis points as a percent of sales. The decrease related
primarily to salary savings and lower Catalog expenses that more than offset
transition costs for the new store distribution network and higher non-cash
pension expense.
Eckerd Drugstores
LIFO operating profit was $54 million in this year's second quarter
compared with $73 million last year. Operating profit margin decreased by 60
basis points as a percent of sales. Total drugstore sales increased 2.3 percent.
Comparable store sales decreased 0.8 percent during the quarter, with pharmacy
sales increasing 1.7 percent and non-pharmacy, or front-end, sales decreasing
6.0 percent. Pharmacy sales were negatively impacted by approximately 430 basis
points from the effects of higher generic dispensing rates and other changes in
branded drugs. The best performing front-end categories for the quarter were
seasonal items and over-the-counter medications, while photo and cigarette sales
declined significantly. Eckerd's sales reflect increased competitor store
openings, particularly in Florida and south Texas, coupled with execution
issues. These issues are being addressed through merchandise and marketing
changes, as well as a more competitive store opening program beginning in 2003.
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Gross margin for the quarter decreased by 40 basis points as a percent of
sales. Gross margin for the quarter includes a LIFO charge of $11 million
compared with a charge of $9 million last year. SG&A expenses increased 3.2
percent and were not leveraged as a percent of sales.
Other Unallocated
Other unallocated in this year's second quarter was a net credit of $11
million. The credit includes $30 million of real estate gains on the sale of
closed department store facilities and the charges include $24 million of
previously announced Catalog restructuring and department store closings.
Financial Condition
The Company's financial condition and liquidity remain strong. At the end
of the quarter, cash investments were approximately $2.6 billion and represented
in excess of 40 percent of long-term debt. Capital expenditures are currently
expected to be at the lower end of previous guidance of $900 million to $1.1
billion. Full year free cash flow is expected to be in line with previous
guidance.
Senior management will host a live conference call and real-time webcast on
Tuesday, August 12, 2003, beginning at 9:30 a.m. EDT. Access to the conference
call is open to the press and general public in a listen only mode. To access
the conference call, please dial 416-695-5261 and reference the JCPenney
Quarterly Earnings Conference Call. The telephone playback will be available for
two days beginning approximately two hours after the conclusion of the call by
dialing 416-695-6030 and entering the ID code 6308. The live webcast may be
accessed via JCPenney's Investor Relations website (at JCPenney.net), or on
StreetEvents.com (for members) and companyboardroom.com (for media and
individual investors). Replays of the webcast will be available for up to 90
days after the event.
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J. C. Penney Corporation, Inc., the wholly-owned operating subsidiary of
the Company, is one of America's largest department store, drugstore, catalog,
and e-commerce retailers, employing approximately 230,000 associates. As of July
26, 2003, it operated 1,040 JCPenney department stores throughout the United
States, Puerto Rico, and Mexico, and 56 Renner department stores in Brazil.
Eckerd Corporation operated 2,710 drugstores throughout the Southeast, Sunbelt,
and Northeast regions of the U.S. JCPenney Catalog, including e-commerce, is the
nation's largest catalog merchant of general merchandise. J. C. Penney
Corporation, Inc. is a contributor to JCPenney Afterschool Fund, a charitable
organization committed to providing children with high quality after school
programs to help them reach their full potential.
This release may contain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements, which reflect the Company's current views of future events and
financial performance, involve known and unknown risks and uncertainties that
may cause the Company's actual results to be materially different from planned
or expected results. Those risks and uncertainties include, but are not limited
to, competition, consumer demand, seasonality, economic conditions, and
government activity. Investors should take such risks into account when making
investment decisions.
J. C. PENNEY COMPANY, INC.
SUMMARY OF OPERATING RESULTS
(Amounts in millions except per share data)
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13 weeks ended 26 weeks ended
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July 26, July 27, % Inc. July 26, July 27, % Inc.
2003 2002 (Dec.) 2003 2002 (Dec.)
Comparable store sales increase/(decrease)
Department stores 2.1% -2.4% -1.6% 2.5%
Eckerd drugstores -0.8% 6.1% -1.0% 6.9%
Total retail sales
Department stores and catalog $ 3,658 $ 3,623 1.0% $ 7,381 $ 7,629 -3.3%
Eckerd drugstores 3,655 3,575 2.3% 7,425 7,297 1.8%
----- ----- ----- -----
Total 7,313 7,198 1.6% 14,806 14,926 -0.8%
Margins and expenses
- --------------------
Gross margin - LIFO
Department stores and catalog 1,314 1,307 0.5% 2,774 2,821 -1.7%
Eckerd drugstores 833 828 0.6% 1,699 1,667 1.9%
----- ----- ----- -----
Total 2,147 2,135 0.6% 4,473 4,488 -0.3%
Selling, general and
administrative (SG&A) expenses
Department stores and catalog (1,263) (1,285) -1.7% (2,640) (2,642) -0.1%
Eckerd drugstores (779) (755) 3.2% (1,527) (1,494) 2.2%
----- ----- ----- -----
Total (2,042) (2,040) 0.1% (4,167) (4,136) 0.7%
Segment operating profit - LIFO
Department stores and catalog 51 22 100.0% + 134 179 -25.1%
Eckerd drugstores 54 73 -26.0% 172 173 -0.6%
----- ----- ----- -----
Total 105 95 10.5% 306 352 -13.1%
Other unallocated 11 (5) N/A 18 (15) N/A
Net interest expense (108) (92) 17.4% (212) (194) 9.3%
Acquisition amortization (8) (7) 14.3% (18) (17) 5.9%
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Income/(loss) before income taxes 0 (9) 100.0% + 94 126 -25.4%
Income taxes 0 3 -100.0% +(33) (46) -28.2%
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Net income/(loss) $ 0 $(6) 100.0% +$61 $ 80 -23.8%
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(Loss)/earnings per share - diluted $(0.02) $(0.05) 60.0% $ 0.18 $ 0.24 -25.0%
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13 weeks ended 26 weeks ended
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July 26, July 27, July 26, July 27,
2003 2002 2003 2002
SEGMENT FINANCIAL DATA:
Department stores and catalog
Ratios as a % of sales:
FIFO/LIFO gross margin 35.9% 36.1% 37.6% 37.0%
SG&A expenses 34.5% 35.5% 35.8% 34.6%
Segment operating profit 1.4% 0.6% 1.8% 2.4%
Depreciation and amortization (1) $ 88 $ 94 $ 177 $ 186
Eckerd drugstores
Ratios as a % of sales:
FIFO gross margin 23.1% 23.4% 23.2% 23.2%
LIFO gross margin 22.8% 23.2% 22.9% 22.9%
SG&A expenses 21.3% 21.1% 20.6% 20.5%
Segment operating profit 1.5% 2.1% 2.3% 2.4%
LIFO charge $ 11 $ 9 $ 18 $ 24
Depreciation and amortization 69 60 138 121
SUPPLEMENTAL DATA:
Average shares outstanding (basic shares) 271.5 267.7 271.0 266.8
Average shares used for diluted EPS 271.5 267.7 273.0 269.8
Effective income tax rate 35.4% 36.5% 35.4% 36.5%
BALANCE SHEET HIGHLIGHTS:
Cash and short-term investments $ 2,631 $ 2,004
FIFO inventory:
Department stores and catalog 3,166 3,100
Eckerd drugstores 2,430 2,303
Long-term debt, including current maturities (2) 5,803 5,186
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(1) Excludes $10 million and $22 million of accelerated depreciation for
catalog facilities for the 13 weeks and 26 weeks ended July 26, 2003, which
is included in Other Unallocated.
(2) Excludes present value of operating leases and Eckerd's securitized
receivables