Exhibit 99.1
JCPenney News Release
<table>
<c> <c> <c> <c>
CONTACT
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
- -------------------- --------------------- -------------------- ---------------------
</table>
JCPENNEY REPORTS FOURTH QUARTER EARNINGS
Earnings Per Share from Continuing Operations Increase 43 Percent
Financial Condition Continues to Strengthen
PLANO, Texas, February 26, 2004 - J. C. Penney Company, Inc. (NYSE: JCP)
reported today that fourth quarter earnings per share from continuing operations
increased 43 percent to $0.83 versus comparable earnings of $0.58 per share last
year. Full year earnings per share from continuing operations increased 27
percent to $1.21 versus comparable earnings of $0.95 per share last year. In
accordance with current accounting rules, Eckerd drugstores and Mexico
department store operations are being reported as discontinued operations,
resulting in a net loss for the quarter and full year of $3.42 and $3.13 per
share, respectively (see discussion below).
Allen Questrom, Chairman and Chief Executive Officer said, "I am pleased
with our continuing progress in the department store and catalog/Internet
business. Department stores generated a comparable store sales increase for the
third consecutive year. Catalog/Internet had its first sales gain after several
years of repositioning, with very strong Internet sales, and a significant
improvement in its contribution to results. We continue to focus on providing
our customers with a compelling value across all three channels - department
stores, catalog and Internet - through improved merchandise assortments,
integrated marketing programs, and an enhanced shopping experience. We have
implemented the majority of our centralization initiatives and are now
positioned to turn our attention to improving execution and consistency, as well
as creating a more competitive expense structure."
<page>
Looking ahead to 2004, Questrom added, "We anticipate a much better
consumer environment this year, and the first half is expected to be especially
strong. Last year's first quarter was impacted by a number of adverse factors.
In 2004, higher refunds and lower withholding rates from the President's tax
package, together with the current low-interest rate environment, will benefit
the moderate customer. We expect our business to continue to generate sales and
profit improvement, and are encouraged by recent business trends. I am confident
that we are on track to achieve our operating profit goal of six to eight
percent of sales in 2005."
Addressing Eckerd, Questrom stated, "We have concluded that a sale of
Eckerd, at an appropriate price, is in the best interest of our customers,
associates and shareholders, and will allow both JCPenney and Eckerd to maximize
their potential. We are in active negotiations with interested parties and
continue to make progress on a sale transaction. I appreciate all of the hard
work and dedication that have created this valuable customer franchise, and know
Eckerd associates will continue to serve customers in the highest professional
manner, regardless of any change in ownership."
Department Stores and Catalog/Internet
- --------------------------------------
Fourth quarter operating profit increased 28 percent to $445 million
compared with $349 million in last year's period. Operating profit was 7.3
percent of sales, an increase of 120 basis points. Operating profit reflects the
continuation of substantial increases in the gross margin ratio as well as
significant growth in catalog/Internet's profit contribution. Comparable
department store sales increased 3.2 percent on a 13-week basis, representing
the third consecutive year with strong holiday sales gains, and catalog/Internet
sales increased 8.7 percent on a 13-week basis. Internet sales continue to
experience strong growth, increasing by about 50 percent for both the fourth
quarter and full year, and exceeded $600 million in sales for the full year.
2
<page>
Department Stores and Catalog gross margin increased by 190 basis points as
a percent of sales in the quarter, and continues to benefit from better
execution in a centralized environment. The acceleration of gross margin over
the last several years reflects the Company's focus on providing the customer
with fashionable, trend-right product that delivers compelling quality and value
for the moderate customer. Since converting to a centralized organization,
improvements in operating results reflect the leverage of centralized buying,
significantly improved marketing, more effective store presentations, a
repositioning of the catalog model and the exceptional growth of Internet.
SG&A expenses increased as a result of planned increases in advertising,
costs associated with the store distribution center network, and higher non-cash
pension expense, as well as expenses related to this year's 53rd week. In
addition, operating expenses include the previously announced charge of $20
million for contract cancellations and separation benefits associated with the
first phase of the Company's cost savings initiative. The cost reduction program
is expected to result in annualized cost savings in excess of $200 million when
fully implemented.
Discontinued Operations
- -----------------------
During 2003, the Company evaluated strategic alternatives for all of its
businesses, including Eckerd. In the fourth quarter, the Company's Board of
Directors concluded that a plan to sell Eckerd, at an appropriate price, is in
the best interest of the Company's shareholders. Having met the criteria of
Statement of Financial Accounting Standard No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," Eckerd's net assets were
classified as "held for sale" and its results of operations and financial
position reported as a discontinued operation beginning in the fourth quarter of
2003.
The accounting rules also require the recording of certain financial
estimates related to a prospective sale, even though a definitive agreement has
not been reached. This year's fourth quarter includes a non-cash charge of $450
million to reflect the Company's investment in Eckerd, as well as goodwill, at
their estimated fair values. In addition, the Company was required to recognize
a non-cash charge of $875 million to reflect the deferred tax liability for the
excess of fair value over the tax basis of Eckerd. The tax basis of Eckerd is
lower than its book basis because the Company's drugstore acquisitions were
largely tax-free transactions.
3
<page>
Also included in discontinued operations is the loss on the November 2003
sale of the Company's Mexico department store operation. More specific
information on the components of discontinued operations is shown on the
attached financial schedules. The Company has also conformed prior period
financial results to reflect Eckerd and Mexico as discontinued operations (see
attached schedules).
Financial Condition
- --------------------
The Company's financial condition and liquidity continued to strengthen in
2003. Free cash flow from continuing operations was approximately $375 million
for the year, substantially higher than original guidance (free cash flow is
defined as cash flow from operating activities, less dividends and capital
expenditures, net of proceeds from the sale of assets). Cash flow benefited from
improved operating results and capital expenditure management. In addition, cash
flow also reflects the Company's $300 million cash contribution to the pension
plan in the third quarter. At year-end, cash investments were approximately $3
billion and represented in excess of 50 percent of the Company's $5.4 billion of
consolidated long-term debt. The Company's strong financial position continues
to provide the resources to maintain strong liquidity and financial flexibility
as it focuses on improving the performance of department stores and
catalog/Internet.
Guidance
- --------
At this time, the Company is only providing 2004 guidance for department
stores and catalog/Internet operating profit and first quarter earnings per
share from continuing operations. For the year, operating profit is expected to
improve by approximately 80 basis points to the area of 5.2 percent of sales,
with contributions from both gross margin and SG&A. For the first quarter,
earnings from continuing operations are expected to be in the range of $0.09 to
$0.12 per share compared with last year's $0.05 per share.
4
<page>
Senior management will host a live conference call and real-time webcast on
Thursday, February 26, 2004, 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 973-935-2035 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 402-220-2910. 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 J.
C. Penney Company, Inc., (the "Company") is one of America's largest department
store, catalog, and e-commerce retailers, employing approximately 150,000
associates. As of January 31, 2004, J. C. Penney Corporation, Inc. operated
1,019 JCPenney department stores throughout the United States and Puerto Rico,
and 58 Renner department stores in Brazil. 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.
# # #
5
J. C. PENNEY COMPANY, INC.
SUMMARY OF OPERATING RESULTS
-----------------------------
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--------------------------------------- ----------------------------------
14 weeks 13 weeks 53 weeks 52 weeks
ended ended ended ended
Jan. 31, Jan. 25, Inc. Jan. 31, Jan. 25, Inc.
2004 2003 (Dec.) 2004 2003 (Dec.)
--------------------------------------- ----------------------------------
Comparable department store
sales increase (1) 3.2% 1.9% 0.9% 2.7%
Department Stores and Catalog/Internet
net sales $ 6,098 $ 5,743 6.2% $ 17,786 $ 17,633 0.9%
Gross margin 2,188 1,950 12.2% 6,620 6,334 4.5%
Selling, general and
administrative (SG&A) expenses (1,743) (1,601) 8.9% (5,830) (5,634) 3.5%
------- ------- ------- -------
Operating profit 445 349 27.5% 790 700 12.9%
Net interest expense (62) (62) 0.0% (261) (226) 15.5%
Real estate and other - (43) 100.0% + 17 (59) 100.0% +
------- ------- ------- -------
Income from continuing operations
before income taxes 383 244 57.0% 546 415 31.6%
Income taxes (130) (70) 85.7% (182) (130) 40.0%
------- ------- ------- -------
Income from continuing operations 253 174 45.4% 364 285 27.7%
Discontinued operations (1,322) 28 N/A (1,292) 120 N/A
------- ------- ------- -------
Net (loss)/income $ (1,069) $ 202 -100.0% + $ (928) $ 405 -100.0% +
======= ======= ======= =======
Earnings per share from continuing
operations - diluted $ 0.83 $ 0.58 43.1% $ 1.21 $ 0.95 27.4%
Net (loss)/earnings per share - diluted $ (3.42) $ 0.68 -100.0% + $ (3.13) $ 1.36 -100.0% +
</table>
(1) The Company's fiscal year ending January 31, 2004 includes a 53rd week.
Comparable store sales for the fourth quarter and full year of 2003
excludes the effects of the additional week.
1
<page>
J. C. PENNEY COMPANY, INC.
SUMMARY OF OPERATING RESULTS
-----------------------------
<table>
<c> <c> <c> <c> <c>
-------------------------------- ----------------------------
14 weeks 13 weeks 53 weeks 52 weeks
ended ended ended ended
Jan. 31, Jan. 25, Jan. 31, Jan. 25,
2004 2003 2004 2003
-------------------------------- ----------------------------
DEPARTMENT STORES AND
CATALOG/INTERNET FINANCIAL DATA:
- --------------------------------
Ratios as a % of sales:
Gross margin 35.9% 34.0% 37.2% 35.9%
SG&A expenses 28.6% 27.9% 32.8% 32.0%
Operating profit 7.3% 6.1% 4.4% 3.9%
Operating profit dollars $ 445 $ 349 $ 790 $ 700
LIFO (credit)/charge (6) 6 (6) 6
Depreciation and amortization 103 91 372 (2) 365
SUPPLEMENTAL DATA:
- ------------------
Average shares outstanding (basic shares) 273.3 268.4 271.9 267.5
Average shares used for diluted EPS 311.1 294.5 297.5 293.0
Effective income tax rate for
continuing operations 33.7% 29.1% 33.2% 31.5%
BALANCE SHEET HIGHLIGHTS:
- --------------------------
Cash and short-term investments $ 2,994 $ 2,474
Department Stores and Catalog/Internet
FIFO inventory 3,199 3,019
Long-term debt, including current maturities 5,356 5,173
Portion of long-term debt attributable to
Eckerd - discontinued operations 1,213 1,151
DISCONTINUED OPERATIONS:
- ------------------------
Eckerd operating profit $ 85 $ 160 $ 291 $ 412
Interest expense (44) (35) (163) (161)
Acquisition amortization (15) (17) (40) (42)
Other (2) (2) (7) (5)
------- ------- ------- -------
Pretax income 24 106 81 204
Income taxes (9) (39) (31) (75)
Fair value/goodwill impairment adjustment (3) (450) - (450) -
Deferred tax effect of book/tax
basis difference (875) - (875) -
------- ------- ------- -------
Total Eckerd (1,310) 67 (1,275) 129
Mexico and other, net of income tax of
$(30), $7, $(30) and $(26), respectively (12) (39) (17) (9)
------- ------- ------- -------
Total discontinued operations $ (1,322) $ 28 $ (1,292) $ 120
======= ======= ======= =======
Eckerd Financial Data:
LIFO (credit)/charge $ (4) $ (13) $ 21 $ 20
Depreciation and amortization 86 68 301 253
FIFO Inventory 2,362 2,318
</table>
(2) Excludes $22 million of accelerated depreciation for catalog facilities for
the 53 weeks ended January 31, 2004, which is included in Real estate and
other.
(3) Represents the non-cash charge to reflect the Company's investment in
Eckerd, as well as goodwill, at their estimated fair values. Additional
information for this charge will be included in the Company's Annual Report
on Form 10-K.
2
<page>
JCPenney Company, Inc.
Income/(Loss) from Continuing Operations
Fiscal 1999 to 2003
<table>
<c> <c> <c> <c> <c> <c>
(in millions, except per share data) Q1 2003 Q2 2003 Q3 2003 Q4 2003 Fiscal 2003
-------- -------- -------- -------- -----------
Retail sales, net
Department Stores $ 3,124 $ 3,084 $ 3,666 $ 5,214 $ 15,088
Catalog/Internet 587 561 666 884 2,698
------ ------ ------ ------ ------
Total 3,711 3,645 4,332 6,098 17,786
Margins and expenses
- --------------------
Gross margin 1,456 1,310 1,666 2,188 6,620
Selling, general and administrative expenses (1,372) (1,257) (1,458) (1,743) (5,830)
------ ------ ------ ------ ------
Operating profit 84 53 208 445 790
Net interest expense (65) (70) (64) (62) (261)
Real estate and other 9 12 (4) - 17
Income/(loss) from continuing operations before
income taxes 28 (5) 140 383 546
Income taxes (8) 2 (46) (130) (182)
====== ====== ====== ====== ======
Income/(loss) from continuing operations $ 20 $ (3) $ 94 $ 253 $ 364
Diluted earnings/(loss) per share from
continuing operations $ 0.05 $ (0.03) $ 0.31 $ 0.83 $ 1.21
Average shares used for diluted earnings/(loss) per share 273 271 298 311 297
Department Stores and Catalog/Internet Financial Results:
- ---------------------------------------------------------
Ratios as a % of sales
Gross margin 39.2% 35.9% 38.5% 35.9% 37.2%
SG&A expenses 37.0% 34.5% 33.7% 28.6% 32.8%
Operating profit 2.2% 1.4% 4.8% 7.3% 4.4%
LIFO credit/(charge) $ - $ - $ - $ 6 $ 6
Depreciation and amortization 89 (1) 88 (1) 92 103 372 (1)
FIFO inventory 3,176 3,155 3,977 3,199 3,199
Effective income tax rate for continuing operations 28.2% -46.6% 33.6% 33.7% 33.2%
</table>
(1) Q1, Q2 and full year of 2003 excludes $12 million, $10 million and $22
million, respectively, of accelerated depreciation, which is included in
Real estate and other.
3
<page>
JCPenney Company, Inc.
Income/(Loss) from Continuing Operations
Fiscal 1999 to 2003
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<c> <c> <c> <c> <c> <c>
(in millions, except per share data) Q1 2002 Q2 2002 Q3 2002 Q4 2002 Fiscal 2002
-------- -------- -------- -------- -----------
Retail sales, net
Department Stores $ 3,330 $ 3,066 $ 3,654 $ 4,971 $15,020
Catalog/Internet 660 540 640 772 2,613
------ ------ ------ ------ ------
Total 3,990 3,606 4,294 5,743 17,633
Margins and expenses
- --------------------
Gross margin 1,507 1,302 1,575 1,950 6,334
Selling, general and administrative expenses (1,350) (1,279) (1,404) (1,601) (5,634)
------ ------ ------ ------ ------
Operating profit 157 23 171 349 700
Net interest expense (54) (52) (58) (62) (226)
Real estate and other (8) (3) (5) (43) (59)
------ ------ ------ ------ ------
Income/(loss) from continuing operations before
income taxes 95 (32) 108 244 415
Income taxes (33) 12 (39) (70) (130)
Income/(loss) from continuing operations $ 62 $ (20) $ 69 $ 174 $ 285
====== ====== ====== ====== ======
Diluted earnings/(loss) per share from
continuing operations $ 0.20 $ (0.10) $ 0.23 $ 0.58 $ 0.95
Average shares used for diluted earnings/(loss) per share 269 268 269 294 293
Department Stores and Catalog/Internet Financial Results:
- ---------------------------------------------------------
Ratios as a % of sales
Gross margin 37.7% 36.1% 36.7% 34.0% 35.9%
SG&A expenses 33.8% 35.5% 32.7% 27.9% 32.0%
Operating profit 3.9% 0.6% 4.0% 6.1% 3.9%
LIFO credit/(charge) $ - $ - $ - $ (6) $ (6)
Depreciation and amortization 91 94 89 91 365
FIFO inventory 2,961 3,078 3,865 3,019 3,019
Effective income tax rate for continuing operations 35.2% -38.9% 35.9% 29.1% 31.5%
</table>
4
<page>
JCPenney Company, Inc.
Income/(Loss) from Continuing Operations
Fiscal 1999 to 2003
<table>
<c> <c> <c> <c> <c> <c>
(in millions, except per share data) Q1 2001 Q2 2001 Q3 2001 Q4 2001 Fiscal 2001
-------- -------- -------- -------- -----------
Retail sales, net
Department Stores $ 3,171 $ 3,155 $ 3,534 $ 4,882 $ 14,743
Catalog/Internet 878 687 812 973 3,349
------ ------ ------ ------ ------
Total 4,049 3,842 4,346 5,855 18,092
Margins and expenses
- ---------------------
Gross margin 1,456 1,274 1,534 1,818 6,082
Selling, general and administrative expenses (1,324) (1,262) (1,384) (1,559) (5,529)
------ ------ ------ ------ ------
Operating profit 132 12 150 259 553
Net interest expense (64) (51) (57) (59) (231)
Real estate and other 12 (23) (15) (22) (48)
------ ------ ------ ------ ------
Income/(loss) from continuing operations before
income taxes 80 (62) 78 178 274
Income taxes (25) 31 (23) (75) (92)
------ ------ ------ ------ ------
Income/(loss) from continuing operations $ 55 $ (31) $ 55 $ 103 $ 182
====== ====== ====== ====== ======
Diluted earnings/(loss) per share from
continuing operations $ 0.18 $ (0.14) $ 0.18 $ 0.34 $ 0.57
Average shares used for diluted earnings/(loss) per share 264 263 268 291 267
Department Stores and Catalog/Internet Financial Results:
- ------------------------------------------------------------
Ratios as a % of sales
Gross margin 36.0% 33.1% 35.3% 31.0% 33.6%
SG&A expenses 32.7% 32.8% 31.8% 26.6% 30.5%
Operating profit 3.3% 0.3% 3.5% 4.4% 3.1%
LIFO credit/(charge) $ - $ - $ - $ 9 $ 9
Depreciation and amortization 101 94 86 87 368
FIFO inventory 3,386 3,415 4,195 2,959 2,959
Effective income tax rate for continuing operations 32.1% -50.7% 28.5% 42.2% 33.4%
</table>
5
<page>
JCPenney Company, Inc.
Income/(Loss) from Continuing Operations
Fiscal 1999 to 2003
<table>
<c> <c> <c>
(in millions, except per share data) Fiscal 2000 Fiscal 1999
Retail sales, net
Department Stores $ 14,520 $ 14,987
Catalog/Internet 4,173 4,290
------ ------
Total 18,693 19,277
Margins and expenses
- --------------------
Gross margin 5,940 6,529
Selling, general and administrative expenses (5,692) (5,864)
------ ------
Operating profit 248 665
Net interest expense (213) 28
Real estate and other (333) (53)
------ ------
Income/(loss) from continuing operations before income taxes (298) 640
Income taxes 123 (204)
------ ------
Income/(loss) from continuing operations $ (175) $ 436
====== ======
Diluted earnings/(loss) per share from
continuing operations $ (0.79) $ 1.54
Average shares used for diluted earnings/(loss) per share 262 260
Department Stores and Catalog/Internet Financial Results:
- ----------------------------------------------------------
Ratios as a % of sales
Gross margin 31.8% 33.9%
SG&A expenses 30.5% 30.4%
Operating profit 1.3% 3.5%
LIFO credit/(charge) $ (14) $ 9
Depreciation and amortization 359 385
FIFO inventory 3,274 3,798
Effective income tax rate for continuing operations -41.2% 32.0%
</table>
6