JCP's private brands attract new customers
J. C. Penney Company, Inc reported net income of $14 million or $0.07 per share for the second quarter ended July 30, 2011, including previously announced restructuring charges. The Company's exclusive and private brands such as Liz Claiborne, Modern Bride, Arizona and St. John's Bay, as well as the expansion of Sephora inside jcpenney attracted new customers to jcpenney, resulting in 1.5 percent comparable store sales growth for the second quarter and 2.7 percent same store sales growth for the first half of the year.
"The challenging economy continues to impact the moderate consumer," said Myron E. (Mike) Ullman, III, chairman and chief executive officer. "Nevertheless, we have made significant strides in implementing our merchandising growth initiatives, with sales gains across our apparel and accessories businesses both in stores and on jcp.com. Through our focus on building attractions, improving sales productivity in stores, managing expenses and streamlining operations, we are committed to delivering on the Company's long-term earnings targets."
Second Quarter Performance
Comparable store sales for the second quarter rose 1.5 percent. Total sales decreased 0.8 percent, reflecting the Company's exit from its catalog business. Internet sales through jcp.com were $326 million in the second quarter, increasing 2.8 percent over last year. Overall, the strongest merchandise results in the period were in women's apparel and accessories and fine jewelry. Geographically, the best performance was in the southwest region of the country.
When compared to the peak margins achieved in last year's second quarter, gross margin decreased approximately 110 basis points to 38.3 percent of sales reflecting the softer than anticipated selling environment early in the quarter and the resulting higher level of promotional activity. Gross margin decreased $55 million, or approximately 3.5 percent, compared to last year's second quarter.
Overall, SG&A expenses were tightly controlled during the quarter and decreased $32 million, or 2.5 percent, versus last year as the Company's ongoing efforts to aggressively manage expenses and optimize operations delivered savings during the quarter. As a percent of sales, SG&A expenses decreased 60 basis points to 31.8 percent. The non-cash qualified pension plan expense was $21 million compared to $55 million in the same period last year. Total operating expenses were 36.2 percent of sales for the quarter. Operating income for the quarter was $81 million or 2.1 percent of sales.
The Company ended the second quarter with approximately $1.6 billion in cash and short-term investments on its balance sheet, even after the completion of its $900 million share repurchase program early in the second quarter. Interest expense for the quarter was the same as last year at $57 million.
The Company also noted that it is comfortable with the level and content of its inventory, as it is in line with expected sales trends, and up approximately 2.3% over last year.