J.C. Penney Company Inc. (JCP) posted first-quarter 2010 results that came in line with Zacks’ expectations. The quarterly earnings of 25 cents a share remained in line with the Zacks Consensus Estimate but jumped more than twofold from 11 cents delivered in the prior-year quarter.
But J.C. Penney, the Plano, Texas-based retailer, gave a modest outlook as it still feels that customers remain budget-conscious, sending the stock down 37 cents or 1.3% to $27.80 in pre-market trading.
Looking ahead, the company now expects third-quarter earnings between 10 cents to 13 cents a share, and fiscal 2010 earnings at $1.64. The current Zacks Consensus Estimate for the third quarter is 14 cents a share, whereas fiscal 2010 Estimate is $1.65.
Total sales for the quarter under review rose 1.2% to $3,929 million, driven by comparable-store sales growth of 1.3%. J. C. Penney said that its shoes and handbags, men’s and children’s items were the top-performing categories.
The company remains on track to deliver comparable-store sales growth and boost market share. For third-quarter 2010, management guided toward a total sales growth between 2% and 2.5% and a comparable-store sales growth in the range of 2.5% to 3%.
The company said gross profit climbed 3.6% to $1,630 million, whereas gross profit margin expanded 90 basis points to 41.4%.
We believe that J.C. Penney’s well-diversified supplier base, compelling private and national brands, marketing campaigns, point-of-sale technology initiatives as well as effective inventory management should drive sales and margin trends over the long-term.
The in-store Sephora departments continue to outperform in drawing younger and more affluent customers. During the quarter, J.C. Penney opened 38 Sephora stores bringing the total to 193. The Sephora concept inspires confidence and is expected to be a significant revenue driver. The company also opened two stores besides closing one during the quarter under review.
J.C. Penney ended the quarter with cash and cash equivalents of $2,378 million, long-term debt of $2,999 million and shareholders’ equity of $4,870 million. The company deployed $116 million towards capital expenditures, and generated a negative free cash flow of $244 million.
J. C. Penney currently operates 1,109 department stores in the United States and Puerto Rico. The company also operates one of the largest apparel and home furnishing sites, jcp.com, and a general merchandise catalog business.
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