JC Penney reports EPS up 66% & Q1 operating sales climbs 37 to 7.5% for 2005

18 May '05

6 min read

Operating Results
During the first quarter, sales were at the high end of guidance. Comparable department store sales increased 3.0 percent on top of a 9.5 percent increase in last year's first quarter, while total department store sales increased 3.7 percent. Improvement in sales was broad-based, with increases in all merchandise divisions and all regions of the country. Catalog/Internet sales increased 5.4 percent on top of a 6.5 percent increase last year. Internet sales increased approximately 35 percent for the quarter as we continue to attract new, younger customers to jcpenney.com.

For the first quarter, gross margin improved by 120 basis points, to 41.3 percent of sales, reflecting continued benefits of the company's centralized business model, including: improved merchandise assortments, better initial merchandise allocations and replenishment, and improved seasonal transitions and clearance.

SG&A expenses increased 2.2 percent on a dollar basis and were leveraged, declining by 60 basis points as a percent of sales. SG&A expenses include a charge of $19 million, or approximately $0.05 per share, related to the expensing of employee stock options. This charge reflects the early adoption of the final accounting rules to recognize compensation expense over the employee service period, which is the earlier of the retirement eligibility date or the normal vesting period.

First quarter operating profit was $313 million or 7.5 percerly adoption of the final accounting rules to recognize compensation expense over the employee service period, which is the earlier of the retirement eligibility date or the normal vesting period.

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