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GuruFocus has detected 3 Warning Signs with JC Penney Co Inc $JCP.
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JC Penney Co Inc (NYSE:JCP)
Gross Profit
$4,441 Mil (TTM As of Apr. 2017)

JC Penney Co Inc's gross profit for the three months ended in Apr. 2017 was $983 Mil. JC Penney Co Inc's gross profit for the trailing twelve months (TTM) ended in Apr. 2017 was $4,441 Mil.

Gross Margin is calculated as gross profit divided by its revenue. JC Penney Co Inc's gross profit for the three months ended in Apr. 2017 was $983 Mil. JC Penney Co Inc's revenue for the three months ended in Apr. 2017 was $2,706 Mil. Therefore, JC Penney Co Inc's Gross Margin for the quarter that ended in Apr. 2017 was 36.33%.

JC Penney Co Inc had a gross margin of 36.33% for the quarter that ended in Apr. 2017 => Competition eroding margins

During the past 13 years, the highest Gross Margin of JC Penney Co Inc was 39.36%. The lowest was 29.45%. And the median was 36.04%.


Definition

Gross Profit is the different between the sale prices and the cost of buying or producing the goods.

JC Penney Co Inc's Gross Profit for the fiscal year that ended in Jan. 2017 is calculated as

Gross Profit (A: Jan. 2017 )=Revenue - Cost of Goods Sold
=12547 - 8071
=4,476

JC Penney Co Inc's Gross Profit for the quarter that ended in Apr. 2017 is calculated as

Gross Profit (Q: Apr. 2017 )=Revenue - Cost of Goods Sold
=2706 - 1723
=983

JC Penney Co Inc Gross Profit for the trailing twelve months (TTM) ended in Apr. 2017 was 1084 (Jul. 2016 ) + 1062 (Oct. 2016 ) + 1312 (Jan. 2017 ) + 983 (Apr. 2017 ) = $4,441 Mil.

Gross Profit is the numerator in the calculation of Gross Margin:

JC Penney Co Inc's Gross Margin for the quarter that ended in Apr. 2017 is calculated as

Gross Margin (Q: Apr. 2017 )=Gross Profit (Q: Apr. 2017 ) / Revenue (Q: Apr. 2017 )
=(Revenue - Cost of Goods Sold) / Revenue
=983 / 2706
=36.33 %

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.


Explanation

Warren Buffett believes that firms with excellent long term economics tend to have consistently higher margins.

Durable competitive advantage creates a high Gross Margin because of the freedom to price in excess of cost. Companies can be categorized by their Gross Margin

1. Greater than 40% = Durable competitive advantage
2. Less than 40% = Competition eroding margins
3. Less than 20% = no sustainable competitive advantage
Consistency of Gross Margin is key

JC Penney Co Inc had a gross margin of 36.33% for the quarter that ended in Apr. 2017 => Competition eroding margins


Related Terms

Cost of Goods Sold, Gross Margin, Revenue


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

JC Penney Co Inc Annual Data

Jan08Jan09Jan10Jan11Jan12Jan13Jan14Jan15Jan16Jan17
Gross_Profit 7,6716,9156,9106,9606,2184,0663,4924,2614,5514,476

JC Penney Co Inc Quarterly Data

Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16Jan17Apr17
Gross_Profit 1,3141,0411,0651,0821,3631,0181,0841,0621,312983
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