J.C. Penney swings to Q4 loss, but sales improve

Plano, Texas -- J.C. Penney swung to an unexpected loss in its fourth quarter amid heavy holiday discounter. But the retailer reported strong, better-than-expected sales, particularly on the online front.



Penney posted a loss of $59 million for the quarter ended Jan. 31, compared to a profit of $35 million in the year-ago period. (Penney benefitted from a one-time tax benefit last year.)



Total sales rose 2.9% to $3.89 billion from $3.78 billion a year ago. Online sales rose 12.5% to $428 million from a year ago.



Men’s apparel, home and fine jewelry were the company’s top performing merchandise divisions during the quarter. Sephora inside J.C. Penney, now in 492 locations, also continued its strong performance.



Penney’s strong topline growth combined with improved merchandise mix and margins on clearance products enabled gross margins to expand 540 basis points to 33.8% of sales from 28.4% of sales. As a result, Penney said its operating income increased to $63 million versus a prior year loss of $138 million. That improvement was eroded by $100 million in interest expense which contributed to its net loss.



For the full year, Penney’s total sales increased 3.4%, and same-store sales increased 4.4%.



Internet sales through jcpenney.com grew $145 million to $1.22 billion for the year, increasing 13.4% over last year.



Gross margin for the year increased 540 basis points to 34.8% from 29.4% in the prior year. SG&A decreased $121 million or 210 basis points compared to the prior year.



EBITDA was $323 million, a more than $1.1 billion improvement from last year. The company ended the year with liquidity of approximately $2.1 billion.



“2014 was a successful year for J.C. Penney,” stated Myron E. (Mike) Ullman, III, CEO. “Thanks to the hard work and outstanding execution by our teams, we significantly grew sales and gross margin and delivered on our goal to generate positive free cash flow, representing a $2.8 billion improvement over last year. We are back in the eyes of our customers, back running the business effectively and back on solid financial footing. We fully intend to build on this momentum and continue to significantly improve our business in 2015.”



Looking ahead, the company expects 2015 same store sales to increase between 3% and 5% and gross margins to expand by 50 to 100 basis points.



“I have been very impressed by what I have seen in my first few months at J.C. Penney,” said Penney president Marvin Ellison, who is taking over the CEO reins from Ullman in August. “The passion and knowledge of our associates and their dedication to customer service is helping us take back share from our competitors, as we continue to find new ways to put the customer first.”