JCP Seeks Rebound in Home
Cecile Corral -- Gifts & Dec, May 21, 2007
JCPenney's home department gasped for air during the first quarter, winded mostly by "our biggest-ticket businesses" — the furniture and window covering categories — the 1,039-unit department store chain reported during its earnings call last week.
But success of newer private brands, including Studio, "continued to outperform the store average," said president and cmo Ken Hicks, and the company has high hopes of resuscitating home with the upcoming Polo Ralph Lauren exclusive American Living merchandise program — which will launch next January in home and across the rest of the store.
"As you slow down with new home openings and there are more existing homes out on the market, that is not probably that positive for window coverings and furniture," said Mike Ullman, chairman and ceo.
"The good news about our department store offering is those are only two of probably 10 businesses in the home area," Ullman said. "So, the soft businesses we believe will respond faster and we think that [the home team] is well positioned to have American Living come into those assortments early next year. While we don't think the home business is going to be a great growth business for us in the near term, we believe we'll manage through that with the strength of our apparel business and accessory business."
On a positive note for home, Ullman singled out the Chris Madden for JCPenney Home collection as one of the retailer's existing eight "power brands" poised to help differentiate JCP from its competitors going forward.
JCP reported record earnings per share from continuing operations for the first quarter of $1.04, up 15.6% from a year ago. Full year earnings guidance inched up to $5.49 per share. Total sales rose 3.1% to $4.35 billion, with department store sales up 4.4% and comps up 2.2%.
Home was soft during the first quarter not only in JCP's department store side but also in the direct side of the business — catalog and dotcom. "Catalog was impacted by soft sales in our big books and continued weakness in the home category," Hicks said. He added that during the second quarter, the retailer expects "direct sales to be down … internet sales to grow … and catalog sales to continue to be challenged by softness in home categories."
Hicks said that specialty catalogs are on the upswing, noting that JCP has up to 4 million names on file "that we are able to target and make sure we get the right book to them for the right business."
J.C. Penney Company, Inc.
|Qtr. 5/5 ($Millions)||2007||2006||% change|
a.First quarter 2007 reflects interest expense of $32 million, compared with $34 million in the quarter last year; and income tax expense of $149 million, compared with $135 million last year. There was no benefit from discontinued operations this quarter, compared to a $3 million benefit for the same quarter last year.
|Oper. Income (EBIT)||419||382||9.7|
|Per share (diluted)||1.04a||0.89a||16.9|
|Average gross margin||41.5%||40.8%||—|
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