Penney's posts small Q2 loss, raises profit outlook

By
Anne D'innocenzio, AP Retail Writer
August 14, 2009, 5:33 PM ET
2 min read

NEW YORK -- J.C. PenneyJCP posted a small loss in the second quarter, just topping Wall Street expectations as the department store chain benefits from cost-cutting moves.

The retailer also boosted its annual profit outlook, but expects sluggish sales for the rest of the year after second-quarter revenue fell 7.9%.

Plano, Texas-based J.C. Penney said it lost $1 million, or break-even per share, in the quarter ended Aug. 1. That compares with a profit of $117 million, or 52 cents a share, in the year-ago period.

Second-quarter results were depressed by a charge related to its pension plan of $106 million, or 28 cents a share after tax, compared with the year-ago period.

Revenue was $3.94 billion, down almost 8% from the year-ago period.

Analysts expected a loss of 1 cent a share on $3.94 billion in revenue.

Same-store sales, or sales at stores opened at least a year, fell 9.5% for the period. Same-store sales are considered a key indicator of a retailer's health. The best-performing categories were shoes and women's apparel, while the weakest areas included children's apparel.

Myron Ullman, III, Penney's chairman and CEO, called the consumer climate "very difficult" but said in a statement that the company's strong financial position has let it invest in several initiatives, including opening its first Manhattan store last month and expanding its Sephora beauty shops in the stores, he said.

Penney and other department store chains have faced increasing challenges as shoppers worry about job security, declining home prices and tight credit. While the stock market has rallied and there are signs of stabilization in the economy, business remains weak.

Also like other retailers, Penney has been cutting inventory in response. It also has been trying to expand its assortment of trendy, affordable labels.

For the third quarter, Penney expects same-store sales to decline anywhere between 5 to 7% and total sales to drop between 3% and 5%. For the full year, Penney said that same-store sales should fall anywhere from 7% to 7.5%. Total sales should decline in the range of 5.5% to 6%.

Based on better-than-expected results for the second quarter, the company raised its annual profit outlook.

It now expects earnings per share to be in the range of 75 cents to 90 cents. That's up from its previous range of 50 cents to 65 cents a share. Analysts surveyed by Thomson Reuters estimated 89 cents a share.