Exhibit 99.1
JCPenney News Release
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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
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JCPENNEY REPORTS STRONG FIRST QUARTER EARNINGS
Operating Profit More Than Doubles
Financial Condition Remains Strong
PLANO, TX, May 18, 2004 -- J. C. Penney Company, Inc. (NYSE: JCP) reported
today that first quarter earnings from continuing operations were $0.38 per
share compared to $0.05 per share last year. Net income includes a charge
related to the previously announced treatment of Eckerd drugstore operations as
a discontinued operation, as discussed below.
Allen Questrom, Chairman and Chief Executive Officer said, "I am very
pleased with JCPenney's continuing progress and first quarter performance. Sales
and operating profits far exceeded our plan, reflecting the strengthening of our
value proposition for the moderate customer. Our management team is
concentrating on delivering fashionable merchandise assortments, superior
quality and compelling value with the convenience of our three shopping options
- - stores, catalog and Internet. We are focused on consistent execution, creating
a more competitive cost structure, and growing our business. Combined with the
financial repositioning from the sale of Eckerd, these efforts are expected to
continue to enhance shareholder value."
Addressing second quarter, Questrom added, "We are optimistic that we will
continue to see improvement in the economy and consumer spending. Because we
face economic and geopolitical issues, we are planning sales and operating
profits conservatively. We currently expect second quarter sales to increase
low-single digits for both comparable department stores and Catalog/Internet,
and earnings to be in the area of six cents per share compared to a three cent
loss last year."
Operating Results
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First quarter operating profit was $229 million compared with $84 million
last year, an increase of 350 basis points as a percent of sales. Operating
profit of 5.7 percent of sales, reflects strong sales and continued improvement
in the gross margin ratio, coupled with SG&A expense leverage. Comparable
department store sales increased 9.5 percent. Sales performance reflects good
customer response to both fashion and basic merchandise, planned marketing
events and an improved store environment. With a 6.5 percent sales increase,
Catalog/Internet's profit contribution continues to generate solid improvement.
Customers are responding to improvements in specialty catalogs and the expanded
assortments and convenience of the Internet. Internet sales increased about 45
percent for the quarter.
Department Stores and Catalog gross margin increased by 90 basis points as
a percent of sales, reflecting good sell-through of seasonal product, less
clearance merchandise, and the continued benefits from centralization
initiatives. SG&A expenses were leveraged by 260 basis points as a percent of
sales. Expenses were well managed and reflect benefits that continue to be
derived from centralization. Expenses also reflect some early savings from the
previously announced cost savings initiative, offset by additional
implementation costs related to the program.
Discontinued Operations
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Beginning in the fourth quarter of 2003, Eckerd results of operations and
financial position were reported as a discontinued operation. The first quarter
loss from discontinued operations includes a charge of $77 million, net of
taxes, to adjust the fair value that was estimated at the end of 2003, as well
as Eckerd's operating results for the quarter. Including this charge, net income
for the quarter was $0.13 cents per share.
Attached to this release are quarterly balance sheets and cash flow
statements for prior periods that reflect Eckerd and the previously divested
Mexico department store operations as discontinued operations.
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Financial Condition
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The Company's financial condition continues to be strong. With better than
planned results in the first quarter, free cash flow from continuing operations
improved over last year. At the end of the quarter, cash investments were $3.0
billion and represented approximately 55 percent of the Company's $5.4 billion
of consolidated long-term debt. The Company continues to expect to receive
approximately $3.5 billion in net cash proceeds from the sale of Eckerd. The
sale process is progressing and is expected to be completed by the end of the
fiscal second quarter. The Company's strong financial position continues to
provide the resources to support and maintain strong liquidity and financial
flexibility as it focuses on improving the performance of the business.
Senior management will host a live conference call and real-time webcast on
Tuesday, May 18, 2004, 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 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
973-341-3080, pin code 4323457. 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, catalog, and
e-commerce retailers, employing approximately 150,000 associates. As of May 1,
2004, J. C. Penney Corporation, Inc. operated 1,021 JCPenney department stores
throughout the United States and Puerto Rico, and 59 Renner department stores in
Brazil. JCPenney Catalog, including e-commerce, is the nation's largest catalog
merchant of general merchandise, and JCPenney.com is one of the largest apparel
and home furnishings sites on the Internet. 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.
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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. In addition, non-GAAP terms referenced, such as EBITDA and
free cash flow, are defined and presented in the Company's 2003 Annual Report on
Form 10-K.
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