JC Penney Earnings Are Not Enough for Investors

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J.C. Penney Co. Inc. (NYSE: JCP) reported its fiscal third-quarter financial results before the markets opened on Friday. The company had a net loss of $0.47 per share on $2.9 billion in revenue, which compares to consensus estimates from Thomson Reuters of a net loss of $0.55 per share on revenue of $2.88 billion. The same period from the previous year had a net loss of $0.77 per share on $2.76 billion in revenue.

For the quarter, all merchandise divisions had positive comp sales gains over last year. Men’s, Home, Footwear, Handbags and Sephora were among J.C. Penney’s top performing divisions.

In terms of the outlook for the fiscal 2015 year, comparable store sales are expected to increase 4% to 5%, gross margin is expected to improve 100 to 150 basis points and free cash flow is expected to be break-even. The consensus estimates for the full fiscal year are a net loss of $1.21 per share on $12.6 billion in revenue.

On the books, the company had $638 million in cash and cash equivalents at the end of the fiscal third quarter, compared to $684 million at the end of the same period of the previous year.

Marvin Ellison, CEO of J.C. Penney, commented on earnings:

The continuation of our strong sales performance this quarter demonstrates ongoing progress towards achieving the Company`s long-term financial targets. We grew the top line, improved margin and intensified our expense discipline.  As we look ahead to the fourth quarter, we are well positioned to compete effectively during the key holiday shopping period thanks to the hard work and dedication of all our associates. While there is significant work to do to improve our Company, the JCPenney team remains determined to regain our status as a world-class retailer.

So far in 2015, J.C. Penney has outperformed the market, with the stock up over 35% year to date. However, over the past 52 weeks the stock is only up about 13%.

Shares of J.C. Penney were down 8.8% at $8.01 early Friday. The consensus analyst price target is $10.05, and the 52-week trading range is $5.90 to $10.09.

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