PLANO, Texas – (Feb. 28, 2019) – J. C. Penney Company, Inc. (NYSE: JCP) today announced financial results for its fiscal fourth quarter and full year ended Feb. 2, 2019. On a shifted basis, which compares the 13 weeks ended Feb. 2, 2019 and Feb. 3, 2018, comparable sales decreased 4.0 %. On an unshifted basis, comparable sales for the fourth quarter decreased 6.0%. For the full year, comparable sales decreased 3.1%. Net income for the quarter was $75 million, or $0.24 per share, and net loss for the full year was $255 million, or ($0.81) per share.
“For the past few months, I have met with and listened to JCPenney associates throughout the organization, as well as our valued suppliers, customers and other partners, to gain their candid perspectives on our Company, both positive and constructive. Based on everything I have seen and heard, I am even more convinced that JCPenney is a revered brand that has the capacity to deliver improved results. In spite of our past financial performance, we have already taken meaningful steps to drive improvement in key businesses such as women’s apparel, active apparel, special sized apparel and fine jewelry,” said Jill Soltau, chief executive officer of JCPenney.
“As we forge a path to sustainable profitable growth, our decisions included eliminating non-core and low gross margin product categories, significantly reducing unproductive inventory and continuing the revitalization of our women’s apparel business. While we are pleased with these actions, we know we need to move faster to reestablish the fundamentals of retail, build capabilities focused on satisfying our customers’ wants and needs and ensure that our digital and store operations operate seamlessly to provide an experience that wins with customers. We have much work to do to position JCPenney for success and create long-term value for our shareholders, however our unwavering focus and discipline is already enabling meaningful progress,” Soltau added.
Fourth Quarter 2018 Results
Unless noted otherwise, the following financial results reflect the 13 weeks ended Feb. 2, 2019 for fiscal 2018 and reflect the 14 weeks ended Feb. 3, 2018 for fiscal 2017.
Total net sales for the 2018 fourth quarter decreased 9.5 % to $3.67 billion compared to $4.05 billion for the fourth quarter last year. On a shifted basis, which compares the 13 weeks ended Feb. 2, 2019 and Feb. 3, 2018, comparable sales decreased 4.0 %. On an unshifted basis, comparable sales for the fourth quarter decreased 6.0%. Credit income, which was previously reflected as a reduction to SG&A, was $121 million for the fourth quarter this year compared to $84 million in the fourth quarter last year.
Jewelry, Women’s Apparel, Children’s Apparel and Men’s Apparel were the Company’s top performing divisions during the quarter.
Cost of goods sold, which excludes depreciation and amortization, was $2.52 billion, or 68.7 % of sales, compared to $2.69 billion, or 66.5 % of sales in the same period last year. The increase as a rate of sales was primarily driven by planned markdown and pricing actions taken in the quarter related to the Company’s initiatives to reduce excess inventory.
SG&A expenses were $1.01 billion, or 27.5 % of sales this year compared to $1.05 billion, or 26.0 % of sales, last year. The dollar reduction this year was primarily attributable to additional SG&A expenses last year related to the extra week in the fourth quarter of fiscal 2017. In addition, other SG&A expense reductions included lower incentive compensation.
Net income for the fourth quarter was $75 million, or $0.24 per share, compared to net income of $242 million, or $0.77 per share in the same period last year.
Adjusted net income was $57 million, or $0.18 per share, compared to adjusted net income of $160 million, or $0.51 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 2018 Results
Unless noted otherwise, the following financial results reflect the 52 weeks ended Feb. 2, 2019 for fiscal 2018 and reflect the 53 weeks ended Feb. 3, 2018 for fiscal 2017.
Total net sales for fiscal 2018 decreased 7.1 % to $11.66 billion compared to $12.55 billion for fiscal 2017. Comparable sales decreased 3.1 % for the year. Credit income for 2018 was $355 million compared to $319 million last year.
Cost of goods sold, which excludes depreciation and amortization, was $7.87 billion, or 67.5 % of sales, for 2018 compared to $8.21 billion, or 65.4 % of sales last year. The increase as a rate of sales was primarily driven by planned markdown and pricing actions taken during the year to reduce excess inventory.
SG&A expenses were $3.60 billion, or 30.8 % of sales this year compared to $3.85 billion, or 30.6 % of sales, last year. The dollar reduction was driven by store controllable costs, lower incentive compensation and corporate overhead.
The Company’s net loss for 2018 was $255 million, or ($0.81) per share, compared to a net loss of $118 million, or ($0.38) per share last year.
Adjusted net loss was $296 million, or ($0.94) per share, this year compared to adjusted net income of $31 million, or $0.10 per share, last year.
Cash and cash equivalents at the end of fiscal 2018 were $333 million. Inventory at the end of the fiscal year was $2.44 billion, down 13.1 % compared to the end of fiscal 2017. Liquidity at year end was approximately $1.9 billion.
2019 Store Closures Update
The Company has determined that it will close 18 full-line stores in 2019, including the three locations previously announced in January. In addition, the Company will also close 9 ancillary home and furniture stores, further aligning the Company’s brick-and-mortar presence with its omnichannel network, and enabling capital resources to be reallocated to locations and initiatives that offer the greatest long-term value potential.
The stores identified for closure either require significant capital, are minimally cash flow positive today relative to the Company's overall consolidated average or represent a real estate monetization opportunity. Comparable sales performance for the closing stores was significantly below the remaining store base and these stores operate at a much higher expense rate given the lack of productivity. Associates who will be impacted by the store closures will receive separation benefits, which includes assistance identifying other employment opportunities and outplacement services, such as resume writing and interview preparation.
During the first half of 2019, the Company expects to record an estimated pre-tax charge of approximately $15 million, primarily relating to non-cash asset impairments and transition costs, in connection with this action.
Nearly all impacted stores are expected to close in the second quarter of 2019.
Outlook The Company currently expects free cash flow1 to be positive for fiscal year 2019.
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.
2018 Fourth Quarter and Full Year Earnings Conference Call Details
At 8:30 a.m. ET today, the Company will host a live conference call conducted by Chief Executive Officer Jill Soltau and Senior Vice President of Finance, Trent Kruse. Management will discuss the Company's performance during the quarter and take questions from participants. To access the conference call, please dial (844) 243-9275, or (225) 283-0394 for international callers, and reference 5057577 conference ID or visit the Company’s investor relations website at https://ir.jcpenney.com. Supplemental slides will be available on the Company’s investor relations website approximately 10 minutes before the start of the conference call.
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 5057577 conference ID.
Investors and others should note that we currently announce material information using SEC filings, press releases, public conference calls and webcasts. In the future, we will continue to use these channels to distribute material information about the Company and may also utilize our 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 we post on our website or on social media channels could be deemed material; therefore, we encourage investors, the media, our customers, business partners and others interested in our Company to review the information we post on our website as well as the following social media channels:
Facebook (https://www.facebook.com/jcp) and Twitter (https://twitter.com/jcpnews).
Any updates to the list of social media channels we 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 over 860 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 98,000 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 jcp.com.
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 and cash flows. 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 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, and the Company’s ability to access the debt or equity markets on favorable terms or at all. 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.