JC Penney Company Inc. (JCP, Financial) investors can now heave a slight sigh of relief. After months of worrying about the slow turnaround of the company, JC Penney reported a decrease in its losses for the quarter as compared to the same period last year. Ron Johnson, the previous CEO of the departmental store company, had tried his hand at reinventing the company which turned out to have disastrous effects. Now that the company is taking minor steps on its path to recovery, investors can hope to witness better performances in the future. Loss for the quarter was posted at $167 million, or $0.55 a share. Revenue reported was $2.86 billion.Share prices saw an increase of 3.1% to $8.98 Â in after-hours trading Wednesday after the company released the quarterly report.
Financial matrix
Sales increased by 2% to $2.86 billion for the quarter ended 2nd May 2015. Revenue for the quarter increased 2.1% to $2.86 million as compared to the same quarter for the previous year. Losses also saw a decrease to $173 million, equating to $0.55 a share. According to data compiled by Thomas Reuters I/B/E/S, a group of analysts expected the company to post a loss of $0.76 a share. For the same period last year, the net loss reported was $352 million or $1.15 a share. Excluding items, losses per share was $0.57. Margins saw a slight increase due to an increased number of house brands coupled with less sale of merchandise from those brands that were discontinued. Same-store sales rose by 3.4%. Analysts had projected the same store sales to increase by 3.5%. The company now has around 87 million active customers, according to CEO Mike Ullman. However, investors and analysts alike feel that the company has to put in greater efforts to bring about profitability. Rick Snyder, an analyst at Maxim Group, said that the market is now dominated with competition. JC Penney has a very long process before them, he said.
Sadly, the debt payments continue to remain a hindrance. The company had taken debt on a large scale to fund its turnaround plan. Hence, outstanding debt is still pending and additional interest payments are being made. Expenses pertaining to selling, general and administrative costs fell by $44 million, due to lower advertising expenditure. Operating income increased by 70% to a loss of $75 million.The women's apparel, men's and home businesses performed the best as compared to other business units. The western and central areas of the country performed the best on a geographic basis.
Management talks
Mike Ullman, the CEO of the Texas-based company, said that shoppers are now responding to to better store renovations as well as new merchandises. He also said that the new home catalog works in their favor. He said that the home catalog helped in bringing back the lapsed customers. "I'm very pleased with our efforts for this quarter and we expect things to continue for the remainder of this year,'' he said. The strong sales on Mother's Day and Easter have restored the company's faith in its effort to increase sales. Hence, the company is confident in raising its yearly expectations for sales and gross margin, he said.
Road ahead
For the full-year 2015, JC Penney has estimated an increase in same store sales between the range 4-5%. The earlier forecast of same store sales was 3% to 5%. The company has also estimated the EBITDA to be around $600 million. Wall Street expects the yearly 2015 EBITDA to be somewhere around $540.6 million. Gross margin for the year is expected to improve by 100-150 basis points. Previously, the company had estimated the gross margin for 2015 to increase by 50-100 basis points. JC Penney also expects an increase in sales as it plans on selling Sephora beauty products online this month. Though the company is expecting a turnaround in terms of profit margin and cash flow, it doesn't seem to happen anytime soon. Share value has decreased 3.6% year over year as of the closing bell, indicating that the company may need its own time to recover.
