JCPenney Narrows Q1 Loss, Raises FY Guidance

For the first quarter ending May 2, 2015, JCPenney reported net sales of $2.86 billion compared to $2.80 billion in the first quarter of 2014. The company narrowed its Q1 loss to $167 million, or 55 cents per share, from the previous year’s net loss of $352 million, or $1.15 per share.

Same-store sales increased 3.4% and gross margin improved 330 basis points to 36.4% of sales, compared to 33.1% in the same quarter last year.

CEO Mike Ullman said, “We are pleased with the company’s solid performance this quarter across all key metrics including sales, gross margin and EBITDA. This year we are switching gears, going on the offensive to gain back share and grow our business profitably while executing our vision to become the preferred shopping choice for Middle America.”

Marvin Ellison, who will succeed Ullman in August, said, “Our exceptional customer experience, when combined with our strength in private brands, national brands and points of differentiation like Sephora inside JCPenney and the Disney Collection, give us confidence in our ability to earn customer loyalty and deliver on our long term goals. In fact, based on our results to date, including a strong Easter and Mother’s Day, we feel confident in raising our 2015 expectations for sales, gross margin and SG&A.”

For the quarter, women’s apparel, men’s and home were the company’s top performing merchandise divisions. Geographically, all regions experienced sales growth when compared to the same period last year with the best performance in the western and central regions of the country.

2015 Outlook

The Company increased its 2015 full-year guidance as follows:
+Comparable store sales: now expected to increase 4% to 5% versus 3% to 5% previously.
+Gross margin: now expected to improve 100 to 150 basis points up from 50 to 100 basis points previously.
+SG&A: now expected to decrease $100 million up from $50 to $100 million previously.
+EBITDA: approximately $600 million.
+Primary pension plan expense: approximately $19 million.
+Depreciation and amortization: approximately $615 million.
+Interest expense: approximately $415 million.
+Capital Expenditures: $250 to $300 million.
+Free cash flow: expected to be break even.