PLANO, Texas - (Aug. 11, 2017) - J. C. Penney Company, Inc. (NYSE: JCP) today announced financial results for its fiscal second quarter ended July 29, 2017.  Total net sales increased 1.5 % to $3.0 billion in the second quarter compared to $2.9 billion in the same period last year.  Comparable sales declined (1.3) % for the second quarter, resulting in a positive two-year stack of 0.9 %.

Marvin R. Ellison, chairman and chief executive officer said, "We are pleased to deliver a top line sales increase of 1.5 % and quarterly sequential improvement of 220 basis points in our comp sales performance in go forward stores.  While broader retail remains challenged, we are encouraged by the improved performance in our total apparel business, including a significant acceleration in kids' apparel.  Nearly all categories delivered improved sales results during the quarter, with our growth initiatives in beauty, home refresh and omnichannel continuing to deliver positive sales growth."

Ellison continued, "During the second quarter, we liquidated inventory in 127 of our closing stores which had a negative impact on gross margin and EPS. These events were isolated to the second quarter.  As such, we are reaffirming our EPS guidance for the year, and remain confident in our ability to further strengthen our balance sheet, while driving sustainable growth and long-term profitability for JCPenney. To that end, we are pleased that we are off to a strong start in August for the all-important back to school season.  We are excited by this momentum and expect to deliver improved results in the back half of the year."

Home, Fine Jewelry, Footwear and Handbags, Sephora and Salon were the Company's top performing divisions during the quarter. Geographically, the Southwest and Southeast were the best performing regions of the country.  

For the second quarter, cost of goods sold, which excludes depreciation and amortization, was $1.9 billion, or 64.9 % of sales, compared to $1.8 billion, or 62.9 % of sales in the same period last year. This increase was primarily driven by the liquidation of inventory in closing stores.

SG&A expenses for the quarter declined $11 million to $842 million, or 28.4 % of sales, and leveraged 80 basis points as a percentage of sales compared to the same period last year.  These savings were primarily driven by reductions in store controllable costs and corporate overhead and an increase in private label credit card income.

For the second quarter, the Company's net loss was ($62) million, or ($0.20) per share, compared to a net loss of ($56) million, or ($0.18) per share in the same period last year.

Adjusted net loss was ($28) million, or ($0.09) per share, for the second quarter this year compared to an adjusted net loss of ($16) million, or ($0.05) per share, last year. 

Adjusted EBITDA for the second quarter was $196 million compared to $233 million last year.  A reconciliation of GAAP to non-GAAP financial measures is included in the schedules accompanying the consolidated financial statements in this release. 

Inventory at the end of the second quarter 2017 was $2.8 billion, a decrease of 6.8 % compared to the end of the second quarter last year.  This reduction was driven by liquidation of inventory in closing stores, and a decrease of 3.7 % in comparable store inventory.  Free cash flow was a positive $303 million, an increase of $234 million versus last year. 

Cash and cash equivalents at the end of the second quarter were $314 million.  During the second quarter, the Company successfully completed its tender offer for $300 million aggregate principal amount of its outstanding 2018 and 2019 bonds, which is expected to reduce annualized interest expense by approximately $23 million.  In addition, the Company successfully amended its $2.35 billion senior secured asset-based revolving credit facility with an extended maturity and improved pricing terms.  The Company ended the quarter with liquidity of approximately $2.3 billion. 

Outlook

The Company has updated its cost of goods sold guidance and reaffirmed the remaining 2017 full year guidance.  As a reminder, fiscal 2017 is a 53-week year which has been incorporated into the full year guidance, with the exception of comparable store sales which are calculated on a comparable 52-week basis.  The following guidance also includes the impact of the Company's store closures.  The fiscal 2017 full year guidance has been updated as follows: 

• Comparable store sales: expected to be -1 % to +1 %;
• Cost of goods sold: now expected to be up 30 to 50 basis points versus 2016;
• SG&A dollars: expected to be down 1 to 2 % versus 2016;
• Adjusted earnings per share¹: expected to be $0.40 to $0.65. 

A reconciliation of non-GAAP forward-looking projections to GAAP financial measures is not available as the nature or amount of potential adjustments, which may be significant, cannot be determined at this time.

Second Quarter Earnings Conference Call Details
At 8:30 a.m. ET today, the Company will host a live conference call conducted by Chairman and Chief Executive Officer Marvin R. Ellison and select members of management.  Management will discuss the Company's performance during the quarter and take questions from participants.  To access the conference call, please dial (844) 243-9275, or (225) 283-0394 for international callers, and reference 61085984 conference ID or visit the Company's investor relations website at http://ir.jcpenney.com.  Supplemental slides will be available on the Company's investor relations website approximately 10 minutes before the start of the conference call.

Telephone playback will be available for seven days beginning approximately two hours after the conclusion of the conference call by dialing (855) 859-2056, or (404) 537-3406 for international callers, and referencing 61085984 conference ID.

Investors and others should note that we currently announce material information using SEC filings, press releases, public conference calls and webcasts.  In the future, we will continue to use these channels to distribute material information about the Company and may also utilize our website and/or various social media to communicate important information about the Company, key personnel, new brands and services, trends, new marketing campaigns, corporate initiatives and other matters.  Information that we post on our website or on social media channels could be deemed material; therefore, we encourage investors, the media, our customers, business partners and others interested in our Company to review the information we post on our website.  

Any updates to the list of social media channels we may use to communicate material information will be posted on the Investor Relations page of the Company's website. 

About JCPenney:

J. C. Penney Company, Inc. (NYSE: JCP), one of the nation's largest apparel and home furnishings retailers, combines an expansive footprint of approximately 875 stores across the United States and Puerto Rico with a powerful e-commerce site, jcp.com, to connect with shoppers how, when and where they prefer to shop. At every customer touchpoint, she will get her Penney's worth of a broad assortment of products from an extensive portfolio of private, exclusive and national brands. Powering this shopping experience is the customer service and warrior spirit of over 100,000 associates across the globe, all driving toward the Company's three strategic priorities of strengthening private brands, becoming a world-class omnichannel retailer and increasing revenue per customer. For additional information, please visit jcp.com.

J. C. PENNEY COMPANY, INC.
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