JCPenney Reports $1.1 Billion Increase in EBITDA for Fiscal 2014

Same Store Sales Up 4.4 % in Fourth Quarter; 4.4% for Full Year
  • Gross margin improved 540 basis points for the fourth quarter and full year
  • SG&A savings of $121 million; 210 basis points improvement for the year
  • Positive free cash flow of $57 million for the year, a $2.8 billion improvement


PLANO, Texas – (Feb. 26, 2015) – J.C. Penney Company, Inc. (NYSE: JCP) today announced financial results for its fiscal fourth quarter and full year ended Jan. 31, 2015. Comparable store sales grew 4.4 percent for both the fourth quarter and full fiscal year. The combination of this sales improvement, stronger gross margins and decreasing SG&A expense resulted in a $1.1 billion increase in EBITDA for the year.

Myron E. (Mike) Ullman, III, chief executive officer, said, “2014 was a successful year for JCPenney. Thanks to the hard work and outstanding execution by our teams, we significantly grew sales and gross margin and delivered on our goal to generate positive free cash flow, representing a $2.8 billion improvement over last year. I am extremely proud of all that has been accomplished to restore this great Company. We are back in the eyes of our customers, back running the business effectively and back on solid financial footing. We fully intend to build on this momentum and continue to significantly improve our business in 2015.”

Marvin Ellison, president and CEO-designee, said, “I have been very impressed by what I have seen in my first few months at JCPenney. The passion and knowledge of our associates and their dedication to customer service is helping us take back share from our competitors, as we continue to find new ways to put the customer first. I believe 2015 will be an important year for JCPenney, and the team is focused on profitably executing our business.”

Fourth Quarter Results
For the fourth quarter, which included a successful holiday season, JCPenney reported net sales of $3.89 billion compared to $3.78 billion in the fourth quarter of 2013. Comparable store sales rose 4.4 percent for the quarter. Online sales through jcpenney.com were $428 million for the quarter, up 12.5 percent versus the same period last year.

Men’s apparel, Home and Fine Jewelry were the Company’s top performing merchandise divisions during the quarter. Sephora inside JCPenney, now in 492 locations, also continued its strong performance. Geographically, all regions delivered sales gains over the same period last year with the best performance in the central and western regions of the country.

For the fourth quarter, gross margin improved 540 basis points to 33.8 percent of sales, compared to 28.4 percent in the same quarter last year. Gross margin was positively impacted by significant improvement in the Company’s merchandise mix and margin on clearance sales over the prior year quarter.

SG&A expenses for the quarter were up $28 million to $1.032 billion, or 26.5 percent of sales.

Operating income for the quarter was $63 million, which represents a $201 million increase over last year. EBITDA was $220 million, a $197 million improvement from the same period last year.

Adjusted net income for the fourth quarter improved $206 million to breakeven. Net income for the quarter was a loss of $59 million, compared to a gain of $35 million in last year’s fourth quarter, which benefitted from a one-time $270 million non-cash tax credit. These income tax changes resulted in a negative year over year impact of $292 million on the Company’s reported net income.

A reconciliation of GAAP to non-GAAP financial measures is included in the schedules accompanying the consolidated financial statements in this release.

Full Year Results
For the full year 2014, comparable store sales increased 4.4 percent. Total sales increased 3.4 percent for the year. Internet sales through jcpenney.com grew $145 million to $1.22 billion for the year, increasing 13.4 percent over last year.

For the year, gross margin increased 540 basis points to 34.8 percent from 29.4 percent in the prior year. SG&A decreased $121 million or 210 basis points compared to the prior year.

EBITDA was $323 million, a more than $1.1 billion improvement from last year.

Free cash flow was $57 million, a positive increase of over $2.8 billion.

The Company ended the year with liquidity of approximately $2.1 billion.

In 2014, the Company opened its first ever store in Brooklyn, N.Y., giving JCPenney a location in all five boroughs of New York City. The Company opened 46 Sephora inside JCPenney boutiques, bringing the total to 492 locations, and announced plans to open 25 additional locations in 2015. In addition, JCPenney, which carries an exclusive assortment of Disney merchandise, is capitalizing on the success of its Disney-branded Shops inside JCPenney by opening an additional 100 locations by back-to-school 2015, bringing the total to nearly 700 locations.

Outlook
Building on the success of 2014, the Company’s 2015 full year guidance is as follows:

  • Comparable store sales: expected to increase 3 percent to 5 percent;
  • Gross margin: expected to improve 50 to 100 basis points versus 2014;
  • SG&A: expected to decrease $50 to $100 million versus 2014;
  • Primary pension plan expense: approximately $19 million;
  • Depreciation and amortization: approximately $615 million;
  • Interest expense: approximately $415 million; and
  • Free cash flow: expected to be flat.

Fourth Quarter and Full Year 2014 Earnings Conference Call Details
At 4:30 p.m. ET today, the Company will host a live conference call conducted by Chief Executive Officer Myron E. (Mike) Ullman, III, President and CEO-Designee Marvin Ellison and Chief Financial Officer Ed Record. Management will discuss the Company's performance during the quarter and take questions from participants. To access the conference call, please dial (877) 415-3179, or (857) 244-7322 for international callers, and reference 49326884 participant code or visit the Company’s investor relations website at http://ir.jcpenney.com.

Telephone playback will be available approximately two hours after the conclusion of the meeting by dialing (888) 286-8010, or (617) 801-6888 for international callers and referencing 46764699 participant code.

Investors and others should note that we currently announce material information using SEC filings, press releases, public conference calls and webcasts. In the future, we will continue to use these channels to distribute material information about the Company and may also utilize our website and/or various social media to communicate important information about the Company, key personnel, new brands and services, trends, new marketing campaigns, corporate initiatives and other matters. Information that we post on our website or on social media channels could be deemed material; therefore, we encourage investors, the media, our customers, business partners and others interested in our Company to review the information we post on our website as well as the following social media channels:

Facebook (https://www.facebook.com/jcp) and Twitter (https://twitter.com/jcpnews).


Media Relations:
(972) 431-3400 or [email protected]

Investor Relations:
(972) 431-5500 or [email protected]

About JCPenney:
J. C. Penney Company, Inc. (NYSE: JCP), one of the nation’s largest apparel and home furnishing retailers, is dedicated to fitting the diversity of America with unparalleled style, quality and value. Across approximately 1,060 stores and at jcpenney.com, customers will discover a broad assortment of national, private and exclusive brands to fit all shapes, sizes, colors and wallets. For more information, please visit jcpenney.com.

Forward-Looking Statements
This release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "expect" and similar expressions identify forward-looking statements, which include, but are not limited to, statements regarding sales, gross margin, selling, general and administrative expenses, and cash flows. Forward-looking statements are based only on the Company's current assumptions and views of future events and financial performance. They are subject to known and unknown risks and uncertainties, many of which are outside of the Company's control 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 confidence and spending patterns, credit availability and debt levels, changes in store traffic trends, the cost of goods, more stringent or costly payment terms and/or the decision by a significant number of vendors not to sell us merchandise on a timely basis or at all, trade restrictions, the ability to monetize non-core assets on acceptable terms, the ability to implement our strategic plan, customer acceptance of our strategies, our ability to attract, motivate and retain key executives and other associates, the impact of cost reduction initiatives, our ability to generate or maintain liquidity, implementation of new systems and platforms, changes in tariff, freight and shipping rates, changes in the cost of fuel and other energy and transportation costs, disruptions and congestion at ports through which we import goods, 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, the ability of the federal government to fund and conduct its operations, a systems failure and/or security breach that results in the theft, transfer or unauthorized disclosure of customer, employee or Company information, legal and regulatory proceedings and the Company’s ability to access the debt or equity markets on favorable terms or at all. There can be no assurances that the Company will achieve expected results, and actual results may be materially less than expectations. Please refer to the Company's most recent Form 10-Q for a further discussion of risks and uncertainties. Investors should take such risks into account and should not rely on forward-looking statements when making investment decisions. Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. We do not undertake to update these forward-looking statements as of any future date.

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