J. C. Penney exceeds expectations & objectives for 2010
19 Feb '10
5 min read
This year's fourth quarter includes a non-cash qualified pension plan expense of $71 million, or $0.18 per share after-tax compared with a credit of $34 million or $0.10 per share after-tax in last year's fourth quarter. As a percent of sales, fourth quarter adjusted operating income was 8.2 percent compared to 6.2 percent last year.
Full Year Operating Performance
For full year 2009, total sales decreased 5 percent compared to last year, while comparable store sales decreased 6.3 percent. The gross margin rate exceeded the Company's previous historic peak and reached 39.4 percent. SG&A dollars decreased $13 million or 0.2 percent compared with last year.
Adjusted operating income excluding qualified pension plan expense decreased only $41 million or 4.1 percent. As a percent of sales, adjusted operating income increased to 5.5 percent versus 5.4 percent last year. Adjusted income from continuing operations was $1.86 per share compared with $2.17 per share last year.
Financial Condition
The Company's financial position improved significantly during 2009, and the cash and cash equivalents balance as of fiscal year-end 2009 was $3.0 billion, an increase of $659 million over last year largely due to the $806 million of free cash flow during the year. Free cash flow, a non-GAAP measure, is defined as net cash provided by operating activities of continuing operations less capital expenditures and dividends paid, plus proceeds from sales of assets.
2010 Full Year Guidance
Management's 2010 guidance is as follows:
• Comparable store sales: expected to increase low single-digits. • Total sales: expected to increase 30 to 50 basis points less than the comparable store sales increase. • Gross margin rate: expected to be flat compared with 2009. • SG&A expenses: expected low single-digit percent increase in dollars. • Depreciation and amortization: approximately $515 million. • Interest expense: approximately $230 million. • Income tax rate: approximately 38 percent. • Average shares for EPS calculation: approximately 238 million common shares. • Earnings per share: expected to be approximately $1.55 per share. • Capital expenditures: expected to be approximately $500 million.
2010 First Quarter Guidance
Management's guidance for the first quarter of 2010 is as follows:
• Comparable store sales: flat to slightly positive. • Total sales: expected to be approximately 30 basis points lower than comparable sales. • Gross margin rate: expected to increase slightly versus last year's first quarter. • SG&A expenses: expected dollar increase of approximately 2 percent. • Depreciation and amortization: approximately $122 million. • Interest expense: approximately $59 million. • Income tax rate: approximately 38 percent. • Average sharesfor EPS calculation: approximately 238 million common shares. • Earnings per share: expected to be in a range of $0.16 to $0.20 per share.
With its strong financial performance in 2009, JCPenney has successfully achieved the objectives of its Bridge Plan. Accordingly, the Company plans to announce new Long Range Plan initiatives and financial performance goals for the five-year period ending in 2014 at its Analyst Meeting in New York City on Apr. 20, 2010.
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