A penny for their business? J.C. Penney is on a roll
J.C. Penney continues to be a bright spot in the retail sector with impressive increases in same store sales and earnings, as well as a new marketing campaign that is generating a lot of buzz.
On Thursday the retailer announced that same store sales grew 4.1 % for the fourth quarter ended Jan. 30. A combination of strong sales growth, accelerated gross margins and disciplined expense reduction resulted in full year adjusted EBITDA of $715 million, a $435 million increase.
Also Thursday the company also debuted a new promotion in which it intends to sell some items for 1 cent.
“We are very pleased with our performance for the fourth quarter and full year. Our focus on private brands, omnichannel and revenue per customer is clearly resonating as we continue to win market share in a competitive environment," saidMarvin R. Ellison, chief executive officer. "We are also pleased that we delivered strong fourth quarter results while effectively managing our inventory, which finished the year up 2.6 %. I would like to thank our over 100,000 associates who embrace our strategy and come to work each day focused on driving sales and providing excellent customer service.”
J.C. Penney's chief marketing executive gave an interview to the Today show Thursday to explain the penny promotion.
"In order to encourage trial, and introduce more customers to the quality and style associated with brands such as Arizona and JCPenney Home, we are hosting a unique promotional event called Penney Days,'' J.C. Penney chief customer and marketing officer Mary Beth West told Today. "At various times throughout the year, we will make available a limited run of some of our five-star-rated items within our private brands so customers have the opportunity to try them for a penny."
J.C. Penney says it will host Penney Days throughout the year to drive customer excitement and showcase the company’s assortment of private brands. The company will promote Penney Days through its weekly sales circulars, digital marketing and via 15-second television spots. J.C. Penney will also launch a social media campaign reminding users of the power of a penny. All campaign elements will be supported by the hashtag #SoWorthIt.
For the fourth quarter, which included a successful holiday season, J.C. Penney reported net sales of $4 billion compared to $3.9 billion in the fourth quarter of 2014.Home, Sephora, footwear, and handbags were the company’s top performing merchandise divisions during the quarter. Geographically, all regions delivered comp sales gains over the same period last year with the best performance in the western and northeastern regions of the country.
For the fourth quarter, gross margin improved 30 basis points to 34.1 % of sales. This acceleration was driven by improvements in clearance and promotional selling margins.Adjusted earnings per share were 39 cents, after excluding charges associated with primary pension plan expense, restructuring costs and the loss on extinguishment of debt. Adjusted net income was $121 million, an improvement of $108 million or 831 %.
For the full year 2015, J.C. Penney reported net sales of $12.6 billion compared to $12.3 billion in 2014, a 3 % increase. Same store sales rose 4.5 % for the year.
“While significant work remains to regain our status as a world-class retailer, the Company's financial performance this year indicates we are on the right path to achieving our long-term financial objectives. Building on the momentum of 2015, and the positive trends of the mid-tier US customer, we now expect positive adjusted earnings in 2016, and EBITDA of $1 billion,” Ellison added.
The company’s 2016 full year guidance is as follows:
Same store sales: expected to increase 3 % to 4 %
Gross margin: expected to increase 40 to 60 basis points versus 2015
SG&A dollars: expected to decrease versus 2015
EBITDA: expected to be $1 billion
Adjusted earnings per share: expected to be positive