Exhibit 99.1
JCPenney News Release
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CONTACT
Quinton Crenshaw Tim Lyons Eli Akresh Bob Johnson
Public Relations Public Relations Investor Relations Investor Relations
(972) 431-5581 (972) 431-4834 (972) 431-2207 (972) 431-2217
qcrensha@jcpenney.com tmlyons@jcpenney.com eakresh@jcpenney.com rvjohnso@jcpenney.com
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JCPENNEY'S THIRD QUARTER OPERATING PROFIT INCREASES 66%
Financial Position Strengthens and Cash Flow Accelerates
Holiday Season Outlook Positive
PLANO, Texas, November 16, 2004 -- J. C. Penney Company, Inc. (NYSE: JCP)
reported today that third quarter operating profit increased 66 percent and
earnings from continuing operations were $0.50 per share compared to $0.31 per
share last year. This year's quarterly earnings included the impact of $47
million, or $0.10 per share, for one-time charges associated with early debt
retirements. Excluding the effects of these charges, earnings per share nearly
doubled from last year.
Allen Questrom, Chairman and Chief Executive Officer said, "Third quarter
operating profit was significantly higher than our original expectations and I
am pleased with the progress we continue to make. We are entering the fourth
quarter with confidence and momentum, and stores are set for the holidays with
exciting merchandise assortments supported by powerful marketing.
Catalog/Internet continues to show strong sales and a significantly improved
profit contribution. We are optimistic the economic environment will continue to
improve. Although high energy prices remain a concern for our customer segment,
we are encouraged by recent trends."
Questrom added, "Our management team continues to focus on delivering
trend-right fashion at affordable prices across all three of our shopping
channels, Stores, Catalog and Internet. We have established a strong foundation
over the past four years that provides a solid basis to take our performance to
the next level as Mike Ullman leads JCPenney into the future."
Operating Results
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Third quarter operating profit increased 66 percent to $346 million
compared with $208 million last year, driven by sales gains and continued
improvement in gross margin and expense leverage. Operating profit increased to
7.7 percent of sales, an improvement of 290 basis points over last year.
Comparable department store sales increased 2.7 percent and reflect strength
throughout all merchandise areas. Catalog/Internet sales increased 3.6 percent
over last year while continuing to provide a significant contribution to
operating profit. Internet remains the fastest growing channel, increasing
nearly 30 percent for the quarter.
Gross margin increased by 230 basis points as a percent of sales reflecting
continued benefits from our centralized business model, including better buying,
marketing, store environment, and seasonal merchandise transition. Expenses were
well managed and leveraged by 60 basis points as a percent of sales.
Financial Condition and Cash Flow
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The Company's equity and debt reduction program announced in August is
proceeding as planned and is expected to be completed within the next six to
nine months. To date, the Company has repurchased 27.6 million shares of common
stock for approximately $1.0 billion, and subsequent to completion of the call
of the 5% Convertible Subordinated Notes, debt will have been reduced by $1.7
billion. At the end of the third quarter, long-term debt was $4.6 billion.
As of October 30, 2004, cash investments were $4.6 billion. During the
third quarter, the Company made a discretionary cash contribution to its pension
plan of $300 million, or about $190 million after tax. The Company expects to
have positive free cash flow for the year, driven by strong operating
performance.
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Fourth Quarter Sales and Earnings Guidance
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Sales for the fourth quarter will be impacted by calendar shifts as a
result of last year's fifty-third week, including the shift in the reporting of
Thanksgiving into November this year from December last year. Sales for the
fourth quarter on a 13 week versus 14 week basis are expected to be down low-
single digits. The Company's monthly sales guidance is available on our investor
relations website at http://www.jcpenney.net/company/finance/weekly.htm.
Operating profit for the fourth quarter is expected to benefit from
improving gross margins and continued SG&A leverage. The Company currently
anticipates that fourth quarter earnings from continuing operations will be in
the range of $0.95 to $1.05 per share, including the impact of an estimated
$0.05 to $0.10 per share from one-time charges. The one-time charges are
principally related to the Company's recently announced senior management
transition as well as potential asset impairments.
Senior management will host a live conference call and real-time webcast on
Tuesday, November 16, 2004, beginning at 9:30 a.m. ET. 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 4323460. 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., is one of America's largest department store, catalog,
and e-commerce retailers, employing approximately 150,000 associates. As of
October 30, 2004, J. C. Penney Corporation, Inc. operated 1,020 JCPenney
department stores throughout the United States and Puerto Rico, and 61 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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J. C. PENNEY COMPANY, INC.
SUMMARY OF OPERATING RESULTS
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(Amounts in millions except per share data)
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13 weeks ended 39 weeks ended
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Oct. 30, Oct. 25, % Inc. Oct. 30, Oct. 25, % Inc.
2004 2003 (Dec.) 2004 2003 (Dec.)
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SALES PERCENTAGES:
Comparable department store
sales increase/(decrease) 2.7% 1.8% 6.2% (0.3)%
Catalog/Internet sales increase/(decrease) 3.6% 4.1% 2.9% (1.4)%
STATEMENTS OF OPERATIONS:
Department Stores and Catalog/Internet
sales, net $ 4,461 $ 4,332 3.0% $ 12,351 $ 11,688 5.7%
Gross margin 1,821 1,666 9.3% 4,879 4,432 10.1%
Selling, general and
administrative (SG&A) expenses 1,475 1,458 1.2% 4,148 4,087 1.5%
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Operating profit 346 208 66.3% 731 345 100.0% +
Net interest expense 71 64 10.9% 177 199 -11.1%
Bond premiums and unamortized costs 47 - 100.0% + 47 - 100.0% +
Real estate and other expense/(income) - 4 N/A (13) (17) N/A
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Income from continuing operations
before income taxes 228 140 62.9% 520 163 100.0% +
Income tax expense 79 46 71.7% 181 52 100.0% +
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Income from continuing operations $ 149 $ 94 58.5% $ 339 $ 111 100.0% +
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Discontinued operations, net of income tax
(benefit)/expense of $-, $(5), $(178) and $22 - (14) N/A (148) 30 N/A
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Net income $ 149 $ 80 86.3% $ 191 $ 141 35.5%
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Earnings per share from continuing
operations - diluted $ 0.50 $ 0.31 61.3% $ 1.12 $ 0.34 100.0% +
Earnings per share - diluted $ 0.50 $ 0.270 85.2% $ 0.64 $ 0.45 42.2%
FINANCIAL DATA:
Ratios as a % of sales:
Gross margin 40.8% 38.5% 39.5% 37.9%
SG&A expenses 33.1% 33.7% 33.6% 35.0%
Operating profit 7.7% 4.8% 5.9% 2.9%
Depreciation and amortization $ 91 $ 92 $ 264 $ 2(1)
Effective income tax rate for
continuing operations 34.9% 33.6% 34.9% 32.3%
COMMON SHARES DATA
Outstanding shares at end of period 267.0 273.0 267.0 273.0
Average shares outstanding (basic shares) 279.2 272.0 279.8 271.3
Average shares used for diluted EPS 309.0 298.0 307.6 273.8
Shares repurchased 27.6 - 27.6 -
Total cost of shares repurchased $ 1,040 $ - $ 1,040 $ -
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(1)Excludes $22 million of accelerated depreciation for catalog facilities for
the 39 weeks ended October 25, 2003, which is included in Real Estate and
Other.
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J. C. PENNEY COMPANY, INC.
SUMMARY OF OPERATING RESULTS
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(Amounts in millions)
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Oct. 30, Oct. 25,
2004 2003
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SUMMARY BALANCE SHEETS:
Cash and short-term investments $ 4,577 $ 1,921
Merchandise inventory (net of LIFO reserves of $43 and $49) 4,237 4,194
Other current assets 386 557
Property and equipment, net 3,496 3,490
Other assets 2,193 1,941
Assets of discontinued operations - 6,973
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Total assets $ 14,889 $ 19,076
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Accounts payable and accrued expenses $ 3,169 $ 2,655
Short-term debt 23 29
Current maturities of long-term debt 603 485
Current income taxes, payable and deferred 110 106
Long-term debt 3,955 5,103
Long-term deferred taxes 1,289 1,330
Other liabilities 997 779
Liabilities of discontinued operations - 2,086
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Total liabilities 10,146 12,573
Stockholders' equity 4,743 6,503
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Total liabilities and stockholders' equity $ 14,889 $ 19,076
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39 weeks ended
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Oct. 30, Oct. 25,
SUMMARY STATEMENTS OF CASH FLOWS: 2004 2003
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Net cash provided by/(used in):
Total operating activities $ (139)(1) $ (575)(1)
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Investing activities
Capital expenditures (317) (243)
Proceeds from sale of assets 28 89
Proceeds from the sale of Eckerd 4,666 -
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Total investing activities 4,377 (154)
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Financing activities
Change in debt (845) 409
Stock repurchase program (1,040) -
Other change in stock 191 6
Dividends paid, preferred and common (116) (114)
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Total financing activities (1,810) 301
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Cash (paid to) discontinued operations (845)(2) (125)
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Net increase/(decrease) in cash and short-term investments 1,583 (553)
Cash and short-term investments at beginning of period 2,994 2,474
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Cash and short-term investments at end of period $ 4,577 $ 1,921
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(1) Includes a voluntary $300 million, or $190 million after tax, contribution
to the Company's pension plan. (2) Includes an income tax payment of $624
million relating to the taxable gain on the sale of Eckerd.
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