JC Penney 1Q Profit Slides on Pension Expense

FILE - In this Feb. 9, 2009 file photo, shoppers look over jewelry at the J.C. Penney store in...

FILE - In this Feb. 9, 2009 file photo, shoppers look over jewelry at the J.C. Penney store in North Riverside, Ill. J.C. Penney said Friday, May 15, first-quarter profit tumbled 79 percent due to a hefty pension expense and that it will miss analysts' earnings estimates for the full year. (AP Photo/Charles Rex Arbogast, file)

(AP)

J.C. Penney Co. said Friday that its first-quarter profit tumbled 79 percent because of a big pension expense, but it narrowly beat analysts' estimates as its expenses fell and demand remained strong for the Sephora cosmetics and American Living merchandise it sells.

Looking ahead, the department store chain said it will miss Wall Street's full-year forecast because of soft consumer spending and weak mall traffic.

Plano, Texas-based J.C. Penney earned $25 million, or 11 cents per share, for the quarter that ended May 2. That compares with $120 million, or 54 cents per share, a year earlier.

Penney's sales dropped 6 percent to $3.88 billion from $4.13 billion in the period a year earlier.

The company is making a payment of $81 million toward pension costs each quarter this year, starting with the first quarter.

Analysts polled by Thomson Reuters, who generally exclude one-time items, on average expected the company to earn 10 cents per share on revenue of $3.88 billion. It's not clear exactly how that forecast compares with the company's unadjusted earnings per share.

Sales at stores open at least a year, known as same-store sales, fell 7.5 percent as weakness in its fine jewelry business countered strong sales of women's apparel. Same-store sales is considered a key metric of a retailer's health because it excludes stores that have opened or closed during the year.

Chairman and Chief Executive Myron E. Ullman III cautioned that the company still expects soft consumer spending and mall traffic for the rest of the year.

Ullman, who took the helm in 2004, has planed store expansions and spearheaded initiatives to lure young and trendy customers to its stores, as consumer spending has remained weak. Department stores have been among the retailers hit hardest during the recession as shoppers have focused on necessities, such as groceries. Macy's Inc. reported this week that its first-quarter loss widened, and Nordstrom Inc. posted a 32 percent drop in quarterly profit on Thursday.