J. C. Penney exceeds expectations & objectives for 2010
J. C. Penney Company, Inc. reported fiscal fourth quarter earnings and cash flow performance that were significantly better than expected. Earnings per share from continuing operations for the fourth quarter ended Jan. 30, 2010, were $0.84 compared with the most recent guidance for earnings per share to be in the range of $0.77 to $0.82. For the full year, earnings from continuing operations were $1.07 per share.
Adjusted operating income for the fourth quarter, which excludes the impact of the non-cash qualified pension plan expense, was $454 million and increased 27.9 percent compared with $355 million in last year's fourth quarter. Fourth quarter adjusted income from continuing operations, excluding qualified pension expense, was $1.02 per share, an increase of 21.4 percent versus $0.84 per share in last year's fourth quarter. Reconciliations of non-GAAP adjusted operating income and income from continuing operations to the nearest GAAP measure are included in this release.
Net income for this year's fourth quarter and full year, including the impact of discontinued operations, was $0.84 and $1.08 per share, respectively. Free cash flow for 2009 was $806 million, an increase of $785 million compared to 2008. A reconciliation of non-GAAP free cash flow to the comparable GAAP measure is included in this release.
"JCPenney far exceeded its expectations and objectives for the year. By stepping up the style of the merchandise we offer customers and enhancing service in our stores, we were able to drive cash generation and profitability, in spite of the difficult economic climate," said Myron E. (Mike) Ullman, III, chairman and chief executive officer. "Our disciplined approach to inventory planning, promotions and SG&A served us well, particularly in the fourth quarter with a planned lower sales volume. As a result, we were able to achieve new peak gross margin levels for the year, which led to better-than-expected profitability and cash flow generation.
"With this strong foundation in place, our focus for fiscal 2010 is driving top-line growth. We intend to deliver positive comparable store sales and market share growth as we leverage our position as a destination for affordable style and create a sense of discovery and excitement for our customers."
Fourth Quarter Operating Performance
Total sales in the fourth quarter decreased 3.6 percent compared to last year, while comparable store sales decreased 4.5 percent. The strongest merchandise results were in women's apparel and shoes, and geographically, the best performance was in the central region of the country. The weakest results were in the home division and the northwest region.
For the quarter, gross margin increased 360 basis points over last year to 38.2 percent of sales. SG&A expenses increased $21 million or 1.4 percent versus last year. As a percent of sales, SG&A expenses increased 140 basis points to 27.2 percent of sales with the rate impacted by lower sales volume. Total operating expenses were 31.3 percent of sales in the fourth quarter.