US: JC Penney lowers outlook as Q3 profit drops 52%
Department store retailer JC Penney Company Inc on Friday (14 November) posted a 52% drop in third quarter profit on lower sales and higher markdowns of its products, and lowered its fourth-quarter outlook.
The Plano, Texas based retailer, which operates 1,093 stores, said profit for the quarter was $124m, or $0.55 per share, compared with $261, or $1.17 per share, last year.
For the three months to 1 November, total sales dropped 8.7%. Same-store sales were down 10.1%, which was in line with earlier guidance.
The best selling items were women's and children's apparel and family shoes, with continued weakness in home and fine jewellery, the company said.
Internet sales fell 0.3%, compared with an 11.8% increase in the same quarter last year.
"We believe that JCPenney continues to be well positioned in a very challenging retail environment," said Myron E (Mike) Ullman III, chairman and chief executive officer.
"As sales have been impacted by lower consumer spending and declining mall traffic, we have been effective in reducing SG&A expenses without compromising our customer experience and in managing our inventories to appropriate levels."
However, Mr Ullman said he expects the "challenging conditions will persist well into 2009."
For the third quarter, operating income declined 280 basis points to 5.9% of sales.
Gross margin fell by 120 basis points to 38.5% of sales as a result of increased clearance activity in response to softer sales and to achieve desired inventory levels.
Total operating expenses fell by $59m, but lower sales volume meant they were up by 160 basis points to 32.6% of sales in the quarter.
In its outlook for the fourth quarter, management said it expects same-store sales to fall by 9% to 11%, and that earnings will be $0.90 to $1.05 per share. Last year it's fourth quarter earnings were $1.93 per share.
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