PLANO, Texas – (Feb. 27, 2020) – J. C. Penney Company, Inc. (NYSE: JCP) today announced financial results for its fiscal quarter and full year period ended Feb. 1, 2020.
- Comparable store sales decreased 7.0%
- Adjusted comparable store sales decreased 4.7%
- Cost of goods sold, as a rate of net sales, improved approximately 200 basis points over prior year
- Net income of $0.08 per share; Adjusted net income of $0.13 per share
- Comparable store sales decreased 7.7%
- Adjusted comparable store sales decreased 5.6%
- Cost of goods sold, as a rate of net sales, improved approximately 210 basis points over prior year
- Adjusted EBITDA of $583 million, 2.6% growth over prior year
- Free Cash Flow of $145 million
- Inventory declined 11.1% to $2.17 billion
- Strong liquidity position of approximately $1.8 billion at year-end
“In Fiscal 2019, we met or exceeded all five financial guidance metrics for the year, and we delivered our third consecutive quarter of meaningful gross-margin improvement in the fourth quarter,” said Jill Soltau, chief executive officer of JCPenney. “I am encouraged by our progress, especially in our women’s apparel businesses. We knew it would take time to restore discipline and return growth to JCPenney. As we move into Fiscal 2020, we remain focused on the key tenets of retail as we continue rebuilding the Company and implementing our Plan for Renewal.”
Fourth Quarter 2019 Results
The following financial results reflect the 13 weeks ended Feb. 1, 2020 for fiscal 2019 and Feb. 2, 2019 for fiscal 2018.
Total net sales for the 2019 fourth quarter decreased 7.7% to $3.38 billion compared to $3.67 billion for the fourth quarter last year. Comparable store sales decreased 7.0% for the quarter. Adjusted comparable store sales, which exclude the impact of the Company’s exit from major appliance and in-store furniture categories, decreased 4.7% for the quarter. Credit income was $109 million for the fourth quarter this year compared to $121 million in the fourth quarter last year.
Cost of goods sold, which excludes depreciation and amortization, was $2.26 billion, or 66.7% of net sales, in the fourth quarter this year compared to $2.52 billion, or 68.7% of net sales, in the same period last year. The 200-basis point improvement as a rate of net sales was primarily driven by improved enterprise clearance selling margins from lower permanent markdowns, the exit from the major appliance and in-store furniture categories earlier this year and improved shrink results.
SG&A expenses for the quarter were $1.01 billion, or 29.7% of net sales, this year compared to $1.01 billion, or 27.5% of net sales, last year. While SG&A dollars were flat to last year, lower advertising and store controllable expenses helped offset higher incentive compensation. Additionally, in connection with the adoption of the new Lease Accounting Standard at the beginning of fiscal 2019, SG&A expenses in the fourth quarter this year included approximately $5 million related to the Company’s home office lease. Last year, the home office lease related expense was recorded as elements of depreciation and amortization and interest expense.
Net income for the fourth quarter was $27 million, or $0.08 per share, compared to net income of $75 million, or $0.24 per share, in the same period last year.
Adjusted net income was $43 million, or $0.13 per share, this year compared to adjusted net income of $57 million, or $0.18 per share, last year.
A reconciliation of GAAP to non-GAAP financial measures is included in the schedules accompanying the consolidated financial statements in this release.
Full Year 2019 Results
The following financial results reflect the 52 weeks ended Feb. 1, 2020 for fiscal 2019 and Feb. 2, 2019 for fiscal 2018.
For fiscal 2019, total net sales decreased 8.1% to $10.72 billion compared to $11.66 billion for fiscal 2018. Comparable store sales decreased 7.7% for the year. Adjusted comparable store sales, which exclude the impact of the Company’s exit from major appliance and in-store furniture categories, decreased 5.6% for the year. Credit income was $451 million this year compared to $355 million last year.
Cost of goods sold, which excludes depreciation and amortization, was $7.01 billion, or 65.4% of net sales, this year compared to $7.87 billion, or 67.5% of net sales, last year. The 210-basis point improvement as a rate of net sales was primarily driven by an increase in both store and online selling margins, improved shrink results and the exit from the major appliance and in-store furniture categories earlier this year.
SG&A expenses for the year were $3.59 billion, or 33.5% of net sales, this year compared to $3.60 billion, or 30.8% of net sales, last year. The decrease in SG&A dollars this year was primarily due to lower advertising and store controllable expenses, which were offset by slightly higher incentive compensation. Last year, the Company recorded an approximate $70 million benefit in SG&A expenses primarily related to the buyout of two store leasehold interests. Additionally, in connection with the adoption of the new Lease Accounting Standard at the beginning of fiscal 2019, SG&A expenses this year included approximately $20 million related to the Company’s home office lease. Last year, the home office lease related expense was recorded as elements of depreciation and amortization and interest expense.
For the year, the Company’s net loss was $268 million, or ($0.84) per share, compared to a net loss of $255 million, or ($0.81) per share, last year.
Adjusted net loss improved to $257 million, or ($0.80) per share, this year compared to an adjusted net loss of $296 million, or ($0.94) per share, last year.
Cash and cash equivalents at the end of fiscal 2019 were $386 million. Free cash flow was $145 million for fiscal 2019, an increase of $34 million compared to the same period last year.
Inventory at the end of the fiscal year was $2.17 billion, down 11.1% compared to the end of fiscal 2018 and down 22.7% when compared to the end of the fiscal 2017.
The Company ended fiscal 2019 with liquidity of approximately $1.8 billion.
2020 Store Closures Update
The Company expects to close at least six store locations in fiscal 2020. The Company will share more details of future real estate plans during its Analyst Day on April 7, 2020.
2020 Financial Guidance
The Company has provided financial guidance for full year fiscal 2020, which does not include any potential impact from the current coronavirus (COVID-19) situation, as follows:
- Comparable store sales: expected to be in a range of (3.5)% to (4.5)%;
- Cost of goods sold, as a rate of net sales: expected to improve 100 to 130 basis points compared to last year;
- Adjusted EBITDA1 dollars: expected to increase 5% to 10% compared to last year; and
- Free Cash Flow1: expected to be positive
1 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 now.
2019 Fourth Quarter and Full Year Earnings Conference Call Details
At 8:30 a.m. ET today, the Company will webcast a live conference call conducted by chief executive officer Jill Soltau and chief financial officer Bill Wafford. Management will discuss the Company’s performance. To access the webcast and related slide presentation, visit the Company’s investor relations website at www.jcpennney.com/investors. Analysts and investors may call in on (844) 243-9275, or (225) 283-0394 for international callers, and reference conference ID 3526039.
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 3526039 conference ID.
Investors and others should note that the Company currently announces material information using SEC filings, press releases, public conference calls and webcasts. In the future, the Company will continue to use these channels to distribute material information about the Company and may also utilize its 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 is posted on its website or on social media channels could be deemed material; therefore, the Company encourages investors, the media, our customers, business partners and others interested in the Company to review the information posted on its website as well as the following social media channels:
Any updates to the list of social media channels the Company may use to communicate material information will be posted on the investor relations page of the Company’s website at www.jcpenney.com.
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J. C. Penney Company, Inc. (NYSE: JCP), one of the nation’s largest apparel and home retailers, combines an expansive footprint of approximately 850 stores across the United States and Puerto Rico with a powerful e-commerce site, jcp.com, to deliver style and value for all hard-working American families. At every touchpoint, customers will discover stylish merchandise at incredible value from an extensive portfolio of private, exclusive and national brands. Reinforcing this shopping experience is the customer service and warrior spirit of approximately 95,000 associates across the globe, all driving toward the Company’s mission to help customers find what they love for less time, money and effort. For additional information, please visit the website.
This release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expect” and similar expressions identify forward-looking statements, which include, but are not limited to, statements regarding sales, cost of goods sold, selling, general and administrative expenses, earnings, cash flows and liquidity. Forward-looking statements are based only on the Company’s current assumptions and views of future events and financial performance. They are subject to known and unknown risks and uncertainties, many of which are outside of the Company’s control that may cause the Company’s actual results to be materially different from planned or expected results. Those risks and uncertainties include, but are not limited to, general economic conditions, including inflation, recession, unemployment levels, consumer confidence and spending patterns, credit availability and debt levels, changes in store traffic trends, the cost of goods, more stringent or costly payment terms and/or the decision by a significant number of vendors not to sell us merchandise on a timely basis or at all, trade restrictions, the ability to monetize non-core assets on acceptable terms, the ability to implement our strategic plan including our omnichannel initiatives, customer acceptance of our strategies, our ability to attract, motivate and retain key executives and other associates, the impact of cost reduction initiatives, our ability to generate or maintain liquidity, implementation of new systems and platforms, changes in tariff, freight and shipping rates, changes in the cost of fuel and other energy and transportation costs, disruptions and congestion at ports through which we import goods, increases in wage and benefit costs, competition and retail industry consolidations, interest rate fluctuations, dollar and other currency valuations, the impact of weather conditions, risks associated with war, an act of terrorism or pandemic, the ability of the federal government to fund and conduct its operations, a systems failure and/or security breach that results in the theft, transfer or unauthorized disclosure of customer, employee or Company information, legal and regulatory proceedings, the Company’s ability to access the debt or equity markets on favorable terms or at all, the Company’s ability to comply with the continued listing criteria of the NYSE, risks arising from the potential suspension of trading of the Company’s common stock on that exchange, and the impact of natural disasters, public health crises, or other catastrophic events on our financial results. There can be no assurances that the Company will achieve expected results, and actual results may be materially less than expectations. Please refer to the Company’s most recent Form 10-Q for a further discussion of risks and uncertainties. Investors should take such risks into account and should not rely on forward-looking statements when making investment decisions. Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. We do not undertake to update these forward-looking statements as of any future date.