Did the Holidays Save JC Penney From the Fate of Sears?

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When J.C. Penney Co. Inc. (NYSE: JCP) released its fiscal fourth-quarter financial results before the markets opened on Thursday, the retailer posted $0.18 in earnings per share (EPS) and $3.67 billion in revenue. This compares with consensus estimates of $0.11 in EPS and $3.79 billion in revenue, and last year’s EPS of $0.51 on revenue of $4.03 billion.

On a shifted basis, comparable sales decreased 4.0% in the latest quarter, while on an unshifted basis comparable sales for the fourth quarter decreased 6.0%.

The company determined that it will close 18 full-line stores in 2019, including the three locations previously announced in January. In addition, it also will close nine ancillary home and furniture stores, further aligning the company’s brick-and-mortar presence with its omnichannel network.

A few highlights from the annual report:

  • A 13.1% reduction in inventory
  • Positive operating cash flow of $359 million
  • Free cash flow of $111 million in fiscal 2018

Looking ahead, the firm expects to see free cash flow be positive for the 2019 fiscal full year. Consensus estimates call for a net loss of $0.77 per share and $11.88 billion in revenue for the full year.

CEO Jill Soltau commented:

As we forge a path to sustainable profitable growth, our decisions included eliminating non-core and low gross margin product categories, significantly reducing unproductive inventory and continuing the revitalization of our women’s apparel business. While we are pleased with these actions, we know we need to move faster to reestablish the fundamentals of retail, build capabilities focused on satisfying our customers’ wants and needs and ensure that our digital and store operations operate seamlessly to provide an experience that wins with customers. We have much work to do to position JCPenney for success and create long-term value for our shareholders, however our unwavering focus and discipline is already enabling meaningful progress.

Shares of J.C. Penney were last seen up about 30% at $1.62 on Thursday, in a 52-week range of $0.92 to $4.36. The stock has a consensus price target of $1.42.

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