JC Penney announces Q2 earnings, total sales boost 5.4%
16 Aug '05
7 min read
Operating Results
During the second quarter, total sales increased 5.4 percent. Department store sales increased 5.1 percent, while comparable department store sales increased 4.2 percent on top of a 6.9 percent increase in last year's second quarter. All merchandise divisions and all regions of the country contributed sales increases. For the quarter, Direct (catalog/Internet) sales increased 7.1 percent versus a 1.6 percent decrease last year, primarily as a result of continued strength in the Internet. Sales for jcpenney.com increased over 30 percent in the quarter in both the current and prior year.
Gross margin improved by 90 basis points to 38.1 percent of sales, reflecting better management of both inventory flow and seasonal transition, as well as continued strength in the performance of the company's private brand merchandise. SG&A expense dollars increased with the higher sales volume but were leveraged, improving by 60 basis points as a percent of sales.
Operating profit was $213 million, or 5.4 percent of sales, compared with $149 million, or 3.9 percent of sales last year. This represents an increase of 43 percent, or 150 basis points as a percent of sales.
Other Charges and Credits
Net interest expense was $40 million in the quarter, lower than original expectations, with interest income benefiting principally from higher short-term interest rates on cash balances. In addition, the company incurred pre-tax charges of $5 million related to the repurchase of debt in open market transactions during the quarter. The company reported $14 million of income from real estate and other, including $8 million in gains from the sale of previously closed facilities. The effective income tax rate for continuing operations was 33.2 percent, reflecting a $5 million one-time credit related to changes in state income taxes.
marketing@alchempro.com
