Monday, November 9, 2009

J. C. Penney Co. (NYSE: JCP): Third Quarter Earnings Preview 2009

J. C. Penney Co. (NYSE: JCP) is scheduled to report third quarter earnings before the market open on Friday, November 13, 2009. Analysts on average expect the company to report earnings of 12 cents per share on revenue of $4.17 billion. In the year ago period, the company reported earnings of 55 cents per share on revenue of $4.73 billion.

J. C. Penney Company, Inc. operates a network of department stores in the United States, Alaska, and Puerto Rico. It primarily offers family apparel and footwear, accessories, fine and fashion jewelry, beauty products, and home furnishings. As of January 31, 2009, J. C. Penney Company operated 1,093 JC Penney department stores.

Department stores like JC Penney were hit hard by the worst recession in decades, as cash strapped shoppers reign in spending and turned to discount stores. Massive layoffs and job insecurity further added to the woes of the retailers. In August, the Plano, Texas-based company reported a net loss of $1 million or breakeven per share for the second quarter, compared to net income of $117 million or $0.52 per share in the prior-year quarter. Quarterly revenue declined 7.9% to $3.94 billion from $4.28 billion in the same quarter last year. Analysts, on average, expected the company to report a loss of $0.01 per share on revenue of $3.94 billion. Comparable store sales for the second quarter dropped 9.5%, compared to a decline of 4.3% in the year-ago quarter. Gross margin as a percentage of sales improved 100 basis points to 38.5% from last year's 37.5%.

However, the company has managed to improve its performance through rigorous cost controls, inventory management and a strategic marketing plan. It is also benefiting from a recovery in demand and economic stabilization.

Early in November, J. C. Penney reported that comparable store sales for the four-week period ended Oct. 31, 2009, decreased 4.5%, slightly better than the company's guidance for sales to decrease 5 to 8%. Similarly, the retailer reported a 1.4% decline in its comparable store sales for the month of September, better than its guidance of a decrease of 3% to 6%. Comparable-store sales for the four-week period ended August 29 decreased 7.9%, in-line with its guidance for sales to decrease 6%-9%.

Early this month, JC Penney raised third quarter earnings guidance after reporting better than expected October sales results. The company expects third quarter earnings to be in the range of $0.10 to $0.11 per share, including a charge of approximately $0.03 per share, primarily related to non-recurring real estate impairments. The retailer's most recent guidance was for third quarter earnings to be in the range of $0.03 to $0.10 per share.

Investors are expected to keenly follow the management's commentary about store traffic and the upcoming holiday season. The Friday after the Thanksgiving holiday marks the start of the crucial holiday shopping period.

In terms of stock performance, J. C. Penney shares have gained 52% since the beginning of the year. Shares of the company rose 72 cents or 2.36% to close at $31.24 on Monday.

Full Disclosure: None.
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