Modest improvement in Gross margin rate - JCP

17 May '10

5 min read

Interest expense for the quarter was $59 million, and the effective tax rate was 37.5 percent.

Cash Flow and Financial Condition
The Company continues to maintain a strong financial position, with the flexibility to support long-term growth initiatives and invest in inventory to drive higher sales growth. As of the end of the first quarter, the Company had cash and short-term investments of $2.4 billion, an increase of $240 million over the same period last year, and long-term debt of $3 billion. In March 2010 the Company retired $393 million of maturing long-term debt from existing cash balances.

Capital expenditures for the first quarter were $116 million, in line with expectations. Merchandise inventories ended the first quarter at $3.2 billion, or slightly below last year's first quarter.

Store Renovations and Closings
During the first quarter, JCPenney opened two new stores and separately closed one store bringing the total number of stores to 1,109. The Company also added the highly successful Sephora inside JCPenney concept to 37 existing stores and one new store location bringing the total number of SiJCP locations to 193.

2010 Second Quarter and Full Year Guidance
Management's 2010 second quarter guidance is as follows:

• Comparable store sales: expected to increase 2.5 to 3.0 percent.
• Total sales: expected to increase approximately 50 basis points less than comparable store sales.
• Gross margin rate: modest improvement versus last year's second quarter.
• SG&A expenses: expected dollar increase of approximately 4.5 percent.
• Depreciation and amortization: approximately $123 million.
• Operating income: expected to improve versus last year as a result of higher sales volume and lower non-cash pension expense.
• Operating income margin: as a percent of sales, operating income is expected to increase due to gross margin improvement and lower non-cash pension expense partially offset by higher SG&A.
• Interest expense: approximately $56 million.
• Income tax rate: approximately 38 percent.
• Average shares for EPS calculation: approximately 238 million common shares.
• Earnings per share: expected to be in the range of $0.10 to $0.13 per share.
• Earnings per share: expected to be approximately $1.64 per share.

J. C. Penney Company Inc

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