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JCPenney Comparable store inventories below last year
Aug '08
J. C. Penney Company Inc reported earnings per share from continuing operations of $0.52 for the second quarter ended Aug. 2, 2008, compared to $0.78 in last year's second quarter. Net income for the quarter decreased 35.7 percent to $117 million.

"In this difficult consumer environment, we have continued to focus on tightly controlling all aspects of our business, and our second quarter results show the benefits of our approach. Our ability to protect our bottom line through rigorous expense control and effective inventory management was enhanced by good initial customer response to our new brand launches and the effectiveness of our promotional pricing actions," said Myron E. (Mike) Ullman III, chairman and chief executive officer of JCPenney.

"Our Bridge Plan allows us to efficiently manage our operations, while at the same time ensure that we continue to offer a great shopping experience at a time when consumers are more discriminating. We entered the Back-to-School season with the most exciting assortment in our history, including such new brands as Decree, Fabulosity and Dorm Life. Our merchandise, combined with our innovative marketing campaign and continually enhanced customer experience, truly differentiates JCPenney from the competition.

"While economic conditions remain difficult, our strategies enable us to maintain our strong financial position and show customers that JCPenney is the best choice for style and quality at a smart price."

The Company reported that comparable store inventory levels at the end of the second quarter were below last year, and it remains on track for total inventory to be below 2007 levels by the end of the Back-to-School season.

Operating Performance:
During the second quarter, total sales decreased 2.5 percent. Comparable store sales decreased 4.3 percent, at the favorable end of the Company's guidance for a mid-single digit decrease. The Company opened 12 new and relocated stores in the quarter, including 11 in the off-mall format.

The best sales performance was in women's apparel and family shoes, with continued weakness in home and fine jewelry. Geographically, the best performances were in the northeast and central regions while the southeast and southwest regions were the softest. Internet sales through www.jcp.com increased 5.6 percent on top of a 17.4 percent increase in the same quarter last year.

For the second quarter, operating income declined 180 basis points to 5.7 percent of sales, and gross margin decreased by 60 basis points to 37.5 percent of sales. The decline in gross margin was mitigated by our customers' positive response to new fall and Back-to-School merchandise, as well as better alignment of inventory to sales trends.

Total operating expenses increased by 120 basis points to 31.8 percent of sales in the quarter, including the impacts of depreciation and amortization expense, pre-opening expenses and income from ongoing real estate operations. SG&A expenses continued to be well-managed across the entire organization, with broad-based savings in the quarter relative to initial expectations. Second quarter operating income was $243 million, compared to last year's $329 million.

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