JCPenney News Release
CONTACT
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Tim Lyons Quinton Crenshaw Eli Akresh Bob Johnson
Public Relations Public Relations Investor Relations Investor Relations
(972) 431-4834 (972) 431-5581 (972) 431-2207 (972) 431-2217
tmlyons@jcpenney.com qcrensha@jcpenney.com eakresh@jcpenney.com rvjohnso@jcpenney.com
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JCPENNEY REPORTS THIRD QUARTER EARNINGS
Department Stores and Catalog Operating Profit Increased 22%
Catalog/Internet Performance Continues to Improve
PLANO, TX, November 11, 2003 -- J. C. Penney Company, Inc. (NYSE: JCP)
today reported third quarter income from continuing operations of $0.27 per
share compared with $0.30 per share in last year's quarter. Earnings were in
line with management's recent guidance.
Allen Questrom, Chairman and Chief Executive Officer said, "Operating
results for Department Stores and Catalog/Internet exceeded our expectations,
reflecting better execution, continuing benefits from our centralized business
model, and delivery of compelling value in all three channels; Department
Stores, Catalog and Internet. Eckerd's results, however, were below expectations
due to weak sales trends. As we have stated previously, the Company is in the
process of evaluating strategic alternatives for Eckerd, and a decision is
expected by the end of the year."
Questrom added, "We anticipate favorable trends in the consumer environment
during the holiday season, and as a result, we expect improving performance in
Department Stores and Catalog/Internet compared with last year. At Eckerd, we
anticipate continued weakness in both sales and operating profit trends. On a
consolidated basis, we currently expect fourth quarter earnings to be in the
area of $0.80 per share, and the full year to be about $1.25 per share."
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Department Stores and Catalog
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Third quarter LIFO operating profit increased 22 percent, or 90 basis
points as a percent of sales, to $207 million compared with $170 million in last
year's period. Comparable department store sales increased 1.7 percent. Sales
were driven by strong trends in Home, Back-to-School apparel, Family Shoes and
Fine Jewelry. Catalog/Internet sales increased 4.1 percent. Print media sales
continue to strengthen, with good results from the Fall/Winter Big Book and a
positive customer response to the Christmas catalog. In addition, Internet sales
continued a strong growth trend, increasing by over 45 percent during the
quarter and year-to-date.
Department Stores and Catalog gross margin increased by 190 basis points as
a percent of sales, and reflects better execution in a centralized environment.
SG&A expenses increased as anticipated, with about half the increase
attributable to non-cash pension expense. The remaining increase reflects the
completion of the store distribution center network, partially offset by expense
savings in store labor from centralized checkouts and the elimination of
in-store receiving.
Eckerd Drugstores
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LIFO operating profit was $34 million in this year's third quarter compared
with $79 million last year. Operating profit margin decreased by 130 basis
points as a percent of sales, principally as a result of weak sales. Total
drugstore sales increased 2.2 percent, while comparable store sales decreased
1.0 percent during the quarter, with pharmacy sales increasing 1.4 percent and
non-pharmacy, or front-end, sales decreasing 6.5 percent.
Gross margin for the quarter decreased by 30 basis points as a percent of
sales. Gross margin for the quarter includes a LIFO charge of $7 million
compared with a charge of $9 million last year. SG&A expenses were not leveraged
as a percent of sales.
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Financial Condition
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The Company's financial condition continues to be strong. As part of its
longer-term strategy of maintaining a well-funded pension plan, the Company
contributed $300 million, or $190 million after-tax, to the plan during the
third quarter. At the end of the quarter, the Company's cash investments were
consistent with its plan at $1.9 billion, reflecting normal holiday inventory
build-up. 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, November 11, 2003, beginning at 9:30 a.m. EST. 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 973-935-8514 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 973-341-3080 and entering the ID code 4279379. The live webcast may be
accessed via JCPenney's Investor Relations website (at JCPenney.net), or on
StreetEvents.com (for members) and FullDisclosure.com (for media and individual
investors). Replays of the webcast will be available for up to 90 days after the
event.
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
October 25, 2003, it operated 1,038 JCPenney department stores throughout the
United States, Puerto Rico, and Mexico, and 56 Renner department stores in
Brazil. Eckerd Corporation operated 2,735 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
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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.
# # #
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J. C. PENNEY COMPANY, INC.
SUMMARY OF OPERATING RESULTS
(Amounts in millions except per share data)
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13 weeks ended 39 weeks ended
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Oct. 25, Oct. 26, Inc. Oct. 25, Oct. 26, Inc.
2003 2002 (Dec.) 2003 2002 (Dec.)
------- ------- ------- ------- ------- -------
Comparable store sales increase/(decrease)
Department stores 1.7% 3.9% -0.4% 3.0%
Eckerd drugstores -1.0% 4.9% -0.9% 6.2%
Total retail sales
Department stores and catalog $ 4,343 $4,310 0.8% $ 11,724 $11,939 -1.8%
Eckerd drugstores 3,642 3,562 2.2% 11,067 10,859 1.9%
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Total 7,985 7,872 1.4% 22,791 22,798 0.0%
Margins and expenses
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Gross margin - LIFO
Department stores and catalog 1,670 1,579 5.8% 4,444 4,400 1.0%
Eckerd drugstores 832 823 1.1% 2,531 2,490 1.6%
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Total 2,502 2,402 4.2% 6,975 6,890 1.2%
Selling, general and
administrative (SG&A) expenses
Department stores and catalog (1,463) (1,409) 3.8% (4,103) (4,051) 1.3%
Eckerd drugstores (798) (744) 7.3% (2,325) (2,238) 3.9%
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Total (2,261) (2,153) 5.0% (6,428) (6,289) 2.2%
Segment operating profit - LIFO
Department stores and catalog 207 170 21.8% 341 349 -2.3%
Eckerd drugstores 34 79 -57.0% 206 252 -18.3%
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Total 241 249 -3.2% 547 601 -9.0%
Other unallocated (6) (4) N/A 12 (19) N/A
Net interest expense (107) (97) 10.3% (319) (291) 9.6%
Acquisition amortization (7) (8) -12.5% (25) (25) 0.0%
Income from continuing operations ------- ------- ------- -------
before income taxes 121 140 -13.6% 215 266 -19.2%
Income taxes (41) (51) -19.6% (74) (97) -23.7%
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Income from continuing operations 80 89 -10.1% 141 169 -16.6%
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Gain on sale of discontinued
operations, net of tax - 34 N/A - 34 N/A
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Net income $ 80 $ 123 -35.0% $ 141 $ 203 -30.5%
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Earnings per share from continuing
operations - diluted $ 0.27 $ 0.30 -10.0% $ 0.45 $ 0.55 -18.2%
Earnings per share - diluted $ 0.27 $ 0.42 -35.7% $ 0.45 $ 0.68 -33.8%
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13 weeks ended 39 weeks ended
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Oct. 25, Oct. 26, Oct. 25, Oct. 26,
2003 2002 2003 2002
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SEGMENT FINANCIAL DATA:
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Department stores and catalog
Ratios as a % of sales:
FIFO/LIFO gross margin 38.5% 36.6% 37.9% 36.8%
SG&A expenses 33.7% 32.7% 35.0% 33.9%
Segment operating profit 4.8% 3.9% 2.9% 2.9%
Depreciation and amortization (1) $ 92 $ 90 $ 269 $ 276
Eckerd drugstores
Ratios as a % of sales:
FIFO gross margin 23.0% 23.3% 23.1% 23.2%
LIFO gross margin 22.8% 23.1% 22.9% 22.9%
SG&A expenses 21.9% 20.9% 21.0% 20.6%
Segment operating profit 0.9% 2.2% 1.9% 2.3%
LIFO charge $ 7 $ 9 $ 25 $ 33
Depreciation and amortization $ 77 $ 64 $ 215 $ 185
SUPPLEMENTAL DATA:
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Average shares outstanding (basic shares) 272.0 268.0 271.3 267.2
Average shares used for diluted EPS 298.0 292.2 273.8 269.7
Effective income tax rate for
continuting operations 33.7% 36.3% 34.5% 36.4%
BALANCE SHEET HIGHLIGHTS:
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Cash and short-term investments $ 1,939 $ 1,748
FIFO inventory:
Department stores and catalog 3,993 3,887
Eckerd drugstores 2,495 2,466
Long-term debt, including current maturities (2) 5,640 5,197
(1) Excludes $22 million of accelerated depreciation for catalog facilities for
the 39 weeks ended October 25, 2003, which is included in Other
Unallocated.
(2) Excludes present value of operating leases and Eckerd's securitized receivables
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