J.C. Penney 3Q Profit Down, Cuts Outlook

PLANO — J.C. Penney Co. said Thursday its third-quarter profit fell 9 percent, hurt by weak sales in September and October, and the department store operator slashed its fourth-quarter outlook.

Its shares fell more than 5 percent in afternoon trading.

Chairman and Chief Executive Myron E. "Mike" Ullman III said it was too early to gauge the strength of holiday traffic in the stores, but he said the season would be marked by lots of price-cutting. He said the department-store company would take a cautious approach into planning for next year.

Ullman was adamant that the recent sales slump was a result of a weakening economy and housing markets, not anything the company was doing wrong. He said Penney's same-store sales had been better than those of rivals over the past few quarters.

"It's not as if we got dumb all of a sudden," Ullman said.

In the quarter ended Nov. 3, Penney's earnings fell to $261 million, or $1.17 per share, from $287 million, or $1.26 per share, a year earlier. Excluding a gain of 14 cents per share from state and federal tax benefits, net income was $1.03 per share.

Analysts, who usually exclude such one-time items, expected a profit of $1.01 per share, according to Thomson Financial.

Penney was able to beat Wall Street's profit target because it sharply lowered expectations after missing September sales goals.

Third-quarter revenue fell 1 percent to $4.73 billion, below the $4.76 billion forecast of analysts surveyed by Thomson.

Same-store sales, or sales in stores open at least one year, fell 3.5 percent. They are a key barometer of a retailer's strength.

Penney said it expects to earn $1.65 to $1.80 per share in the fourth quarter, down from its earlier forecast of $2.41 per share. Analysts were predicting $1.98 per share. The company said same-store sales would decline by a low-single digit percentage.

Its shares tumbled $2.63, or 5.6 percent, to $44.10 in midday trading after sinking to a 52-week low of $44 earlier in the session.

Plano-based Penney, which operates more than 1,000 department stores, said sales were good in early fall. But executives said sales weakened dramatically in September and October due to unseasonably mild weather and a weaker overall retail climate.

Higher gasoline prices are causing consumers to think twice about discretionary purchases, and weak housing markets are cutting into home furnishings, a staple of Penney's catalog business.

"It's hard to sell window coverings for homes that aren't being built," Ullman said.

"We think people expected bad news, but this may be a bit more than was broadly expected," Dana Cohen, an analyst for Banc of America Securities, said in a note to clients.

The recent sales slump led to a buildup in inventory that Penney will try to clear before spring merchandise arrives.

Cohen called the inventory overhang "the real issue to focus on," adding that if Penney slashes prices to move merchandise, it will reverberate throughout the department-store industry.

Company executives and analysts think sales could improve next year with the launch of American Living, a line of clothing and home items designed by Polo Ralph Lauren Corp.

Ullman said the current slump wouldn't change Penney's plans to open 250 stores in the next five years, although he left room to adjust each year's openings up or down.

Back To Top

	Penney, Kohl's Predict Tough Holidays	Associated Press	Thu Nov 15	0
	Macy's Swings to 3rd-Quarter Profit	Associated Press	Wed Nov 14	0
	Tyco Intl 4Q Profit Falls on Charges	Associated Press	Wed Nov 14	0
	Persistent Housing Slump Hits Home Depot	Associated Press	Tue Nov 13	0