J. C. PENNEY COMPANY, INC. REPORTS 2012 FIRST QUARTER RESULTS
Company affirms non-GAAP annual earnings guidance of $2.16 per share
"Sales and profitability have been tougher than anticipated during the first 13 weeks, but the transformation is ahead of schedule. Customers love the new jcp they discover in our stores. Our shop strategy has been applauded by vendor and design partners, our merchants have stepped up to the challenge of improving our merchandise and presentation, we have dramatically simplified our business model and reorganized our teams at headquarters and in our stores. While we have work to do to educate the customer on our pricing strategy and to drive more traffic to our stores, we are confident in our vision to become America's favorite store. We fully expect that the bold and strategic changes we are making to our operations will result in improved profitability and sustainable growth over the long term," said Ron Johnson, chief executive officer of jcpenney.
First Quarter Results:
Comparable store sales for the first quarter declined 18.9 percent. Total sales decreased 20.1 percent, which includes the effects of the Company's exit from its outlet business. Internet sales through jcp.com were $271 million in the first quarter, decreasing 27.9 percent from last year.
Gross margin was 37.6 percent of sales, compared to 40.5 percent in the same period last year. Overall, compared to last year, gross margin was impacted by lower than expected sales in the quarter and the impact of taking deeper seasonal markdowns to clear inventory coming out of the fourth quarter of 2011. This also includes the impact of a $53 million markdown reserve taken as a result of the Company's continuing efforts to reduce inventory levels to align with its new strategy. This reserve had a 170 basis point impact on gross margin; excluding this reserve, gross margin was 39.3 percent of sales. A reconciliation of non-GAAP adjusted gross margin to the most directly comparable GAAP financial measure is included with this release.
The Company's SG&A expenses decreased $121 million versus last year's first quarter. Based on the pace of its ongoing efforts to aggressively manage expenses, coupled with additional operational efficiencies that management has identified, the Company now expects savings to accelerate and exceed the run rate of approximately $900 million at the end of 2012, one year earlier than it had previously announced.
For the first quarter, the Company incurred $76 million in restructuring and management transition charges. These charges comprised the following:
- – Home office and stores $45 million, or $0.13 per share;
- – Leadership transition $20 million, or $0.05 per share;
- – Supply chain $6 million, or $0.02 per share; and
- – Miscellaneous $5 million or $0.01 per share.
The Company anticipates it will incur additional restructuring charges throughout the fiscal year as it takes aggressive action to further simplify its operations and its infrastructure. In addition, as the Company continues to transform its merchandise assortment to align with its new strategy, the Company may incur additional inventory write-downs as it exits certain lines of merchandise. As a result of these impacts, the Company no longer expects to meet its annual GAAP earnings guidance of $1.59 per share, but affirms its non-GAAP earnings guidance of $2.16 per share which excludes non-cash qualified pension expense, restructuring charges and markdown reserves as we transition our merchandise assortment.
Additionally, the Company announced today that it will discontinue the $0.20 per share quarterly dividend. On an annual basis, this will result in cash savings of approximately $175 million, which will be used to help fund the broad-based transformation plan that jcpenney announced in January.
Earnings Event Today/Webcast Details
At 5:00 p.m. ET today, the Company will host an in-person meeting with members of the financial community at SIR Stage 37 in New York City. The jcp leadership team will provide further commentary on the Company's first quarter 2012 financial results, share key learnings from the initial stages of the transformation and present an update on the Company's progress toward becoming America's favorite store.
The presentations and question-and-answer session will also be available live via streaming video and webcast on the Company's investor relations website at ir.jcpenney.com. Replays of the webcasts will be available for up to 90 days after the event.
For individuals without access to the webcast, the event will also be available via live conference call in listen-only mode. To access the presentations and question-and answer session, please dial (800) 381-7839, or (212) 231-2900 for international callers, and reference the jcp first quarter earnings event. Telephone playback will be available for seven days beginning approximately two hours after the conclusion of the meeting by dialing (800) 633-8284, reservation code 21589157 and (402) 977-9140, reservation code 21589157 for international callers.
For further information, contact:
Kristin Hays and Angelika Torres; (972) 431-5500
Daphne Avila and Joey Thomas; (972) 431-3400
Over 110 years ago, James Cash Penney founded his company on the principle of treating customers the way he wanted to be treated himself: fair and square.Today, rooted in its rich heritage, J. C. Penney Company, Inc. (NYSE: JCP) is remaining every aspect of its business in order to reclaim its birthright and become America's favorite store. The Company is transforming the way it does business and remaking the customer experience across its 1,100 jcpenney stores and on jcp.com. At every visit, customers will discover straightforward Fair and Square Pricing, month-long promotions that are in sync with the rhythm of their lives, exceptionally curated merchandise, artful presentation, and unmatched customer service.
For more information about jcpenney, visit jcp.com.
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, general economic conditions, including inflation, recession, unemployment levels, consumer spending patterns, credit availability and debt levels, changes in store traffic trends, the cost of goods, trade restrictions, the impact of changes designed to transform our business, changes in tariff, freight and shipping rates, changes in the cost of fuel and other energy and transportation costs, increases in wage and benefit costs, competition and retail industry consolidations, interest rate fluctuations, dollar and other currency valuations, the impact of weather conditions, risks associated with war, an act of terrorism or pandemic, a systems failure and/or security breach that results in the theft, transfer or unauthorized disclosure of customer, employee or Company information and legal and regulatory proceedings. Please refer to the Company's most recent Form 10-K and subsequent filings for a further discussion of risks and uncertainties. Investors should take such risks into account when making investment decisions. We do not undertake to update these forward-looking statements as of any future date.