J.C. Penney (JCP) Tops Q3 EPS by 2c

(Updated - November 12, 2014 4:05 PM EST)

J.C. Penney (NYSE: JCP) reported Q3 EPS of ($0.77), $0.02 better than the analyst estimate of ($0.79). Revenue for the quarter came in at $2.76 billion versus the consensus estimate of $2.81 billion.

Same store sales flat to last year; up 4.3 % year-to-date

Myron E. (Mike) Ullman, III, Chief Executive Officer, said, "This quarter shows the progress we are making in the final phase of JCPenney's turnaround. We continued to significantly improve the profitability of our business with gross margin expansion of 710 basis points, a $342 million improvement in EBITDA and bottom-line financial results that exceeded even our own expectations. Like most retailers, following a strong start to the back-to-school season, sales did slow in September and October as unseasonably warm weather hindered the sale of fall goods."

Mr. Ullman continued, "During appointment shopping periods like Back to School and Holiday, JCPenney is the customer's preferred destination for discovering great style, quality and value. This year, we are confident customers will once again choose JCPenney for meaningful holiday gifts that fit their family's budget. We are well positioned to compete this holiday season and I would like to thank our associates for their hard work, warrior spirit and commitment to delivering an exceptional customer experience every day."

Financial Position

During the quarter, the Company completed a $400 million offering of senior unsecured notes. The net proceeds of the offering of 8.125 % Senior Notes due 2019 were used to pay the tender consideration and related transaction fees and expenses for the Company's cash tender offers for approximately $327 million aggregate principal amount of its outstanding 6.875 % Medium-Term Notes due 2015, 7.65 % Debentures due 2016 and 7.95 % Debentures due 2017. Subsequent to the completion of the tender offers, the Company used approximately $64 million of available cash to effect a legal defeasance of the remaining outstanding principal amount of Medium-Term Notes due 2015 by depositing funds with the Trustee for the Notes sufficient to make all payments of interest and principal on the outstanding Notes to October 15, 2015, the stated maturity of the Notes. Through the notes offering, tender offer and defeasance, the Company was able to proactively address its near-term debt maturities. As a result, the Company's next debt maturity will be approximately $78 million in August 2016.

The Company ended the quarter with over $1.9 billion in total available liquidity.

Outlook

The Company's guidance for the fourth quarter of 2014 is as follows:

• Comparable store sales: expected to increase 2 % to 4 %;
• Gross margin: expected to increase 500 to 600 basis points versus last year; and
• SG&A expenses: expected to be slightly above last year's levels.

The Company's updated 2014 full-year guidance is as follows:

• Comparable store sales: expected to be 3.5 % to 4.5 %;
• Gross margin: expected to be 500 to 600 basis points above last year;
• Free cash flow: expected to be positive;
• Liquidity: expected to be approximately $2.1 billion at year-end;
• Capital expenditures: expected to be approximately $250 million; and

For earnings history and earnings-related data on J.C. Penney (JCP) click here.

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