J.C. Penney Co., Inc. (JCP) Posts Narrower than Expected Q1 Loss; Offers Q2, FY14 Outlook

J.C. Penney Co., Inc. (NYSE: JCP) reported Q1 EPS of ($1.15), $0.10 better than the analyst estimate of ($1.25). Revenue for the quarter came in at $2.8 billion versus the consensus estimate of $2.71 billion.

Same store sales increase 6.2%, exceeding guidance; second consecutive quarter of growth

Financial Position

The Company also announced today that it has obtained a fully committed and underwritten $2.35 billion senior secured ABL credit facility to replace the Company's existing $1.85 billion ABL bank line, which matures in April 2016. Due to favorable market conditions, the Company decided to pursue this new facility proactively to extend the maturity several years and enhance its liquidity position. This financing is expected to provide better pricing terms and is expected to add $500 million of incremental liquidity during peak seasonal needs. The Company expects to close the facility during the second quarter.

Outlook

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

• Comparable store sales: expected to increase mid-single digits;
• Gross margin: expected to improve sequentially versus first quarter of 2014;
• SG&A expenses: expected to be slightly below last year's levels; and
• Depreciation and amortization: expected to be approximately $155 million.

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

• Comparable store sales: expected to increase mid-single digits;
• Gross margin: expected to improve significantly versus 2013;
• Free cash flow: expected to be breakeven;
• Liquidity: expected to be in excess of $2 billion at year-end;
• Capital expenditures: expected to be approximately $250 million; and
• Depreciation and amortization: expected to be approximately $630 million.

The Company said that, going forward, it will simplify its same store sales calculation to better reflect year-over-year comparability. Certain items, such as sales return estimates and liquidation sales, will now be excluded from the Company's same store sales calculation. Under this new methodology, comparable store sales in the first quarter rose 7.4 %, which includes online sales that grew 25.7 % over the same period last year. For the full year, the Company expects the new sales reporting methodology to have a 10 to 20 basis point impact.

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

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