JCPenney achieves $1 Billion in EBITDA for Full Year 2016; a $477 Million Improvement

  • Operating Income Grew $292 Million in Fourth Quarter and $484 Million for Full Year

PLANO, Texas, 2017-Feb-27 — /EPR Retail News/ — J. C. Penney Company, Inc. (NYSE: JCP) today (Feb. 24, 2017) announced financial results for its fiscal fourth quarter and full year ended Jan. 28, 2017. Comparable store sales were (0.7) % for the fourth quarter and flat for the full year. On a two-year stack basis, comparable sales grew 3.4 % and 4.5 % for the fourth quarter and full year, respectively. The Company delivered a $514 million improvement in net income for the full year.

Marvin R. Ellison, chairman and chief executive officer, said, “We are pleased that in the face of a very challenging 2016 retail environment we delivered our first positive net income since 2010. As recent as 2013, JCPenney reported a net loss of nearly $1.3 billion, or ($5.13) per share, and negative EBITDA of $641 million. This year, we delivered positive net income and generated EBITDA of over $1 billion. This is a reflection that the growth initiatives we laid out at our analyst meeting are working. These initiatives drove significant category growth in the fourth quarter, and provide us a platform to build upon in the years to come. Although our quarter was negatively impacted by the first three weeks of November, we are pleased that we delivered positive sales comps in the combined December and January period. We also saw record online performance over the holiday season, and with our continued focus on improved site functionality, expanded and enhanced fulfillment and continued growth in our assortment, we know this will allow us to deliver significant growth in the digital business.”

Ellison continued, “This year was not without its challenges, particularly in our women’s apparel business, but I am proud this team delivered on our goal to return our company to profitability in 2016. This is no small feat when considering the situation a few years ago, but our over 100,000 associates embraced our strategy and came to work each day focused on doing their part to drive this incredible turnaround in profitability.”

Fourth Quarter Results

JCPenney reported net sales of $4.0 billion in the fourth quarter of 2016 and 2015. Comparable store sales were (0.7) % for the quarter.

Home, Sephora, Salon and Fine Jewelry were the Company’s top performing merchandise divisions during the quarter. Geographically, the Southeast and Pacific were the best performing regions of the country.

For the fourth quarter, gross margin was 33.1 % of sales, a 100 basis point decline compared to the same period last year. Gross margin was impacted primarily by increased promotional activity during the quarter, coupled with the continued growth in both online and major appliances.

SG&A expenses for the quarter were down $37 million to $925 million, or 23.4 % of sales, representing a 70 basis point improvement from last year. These savings were primarily driven by lower incentive compensation and store controllable costs.

For the fourth quarter, the Company delivered a $323 million improvement in net income over the prior year to $192 million or $0.61 per share. Adjusted earnings improved $81 million to $0.64 per share for the fourth quarter this year compared to $0.39 per share last year. Adjusted earnings excludes charges primarily associated with restructuring costs, supplemental retirement plans mark-to-market adjustments and the tax impact resulting from other comprehensive income allocation.

EBITDA improved $288 million to $427 million for the quarter, including the $62 million gain on the home office sale, a 207 % improvement from the same period last year. Adjusted EBITDA for the quarter improved $68 million or 18 % to $449 million.

Full Year Results

For the full year 2016, JCPenney reported net sales of $12.5 billion compared to $12.6 billion in 2015, a (0.6) % decrease. Comparable store sales were flat for the year.

For the year, gross margin decreased 30 basis points to 35.7 % from 36.0 % in the prior year.

SG&A expenses for the full year decreased $237 million to $3.5 billion, or 28.2 % of sales, representing a 170 basis point improvement from last year. These savings were primarily driven by lower incentive compensation, store controllable costs, lower corporate overhead and more efficient advertising spend.

For the full year, the Company delivered a $514 million improvement in net income over the prior year to $1 million or $0.00 per share compared to ($1.68) per share last year. Adjusted earnings per share improved to $0.08 per share for the year compared to ($1.03) per share last year.

EBITDA improved $477 million, including the $62 million gain on the home office sale, to $1.0 billion for the year, a 91 % improvement compared to last year. Adjusted EBITDA for the year improved $294 million to $1.0 billion, a 41 % improvement versus last year.

Inventory at year-end was $2.85 billion, an increase of 4.9% compared to last year-end. Approximately 370 basis points of the increase was driven by floor samples for appliance showrooms and higher inventory levels to support the Company’s continued investment in new Sephora shops. Other basic replenishment inventory accounted for an additional 260 basis points of the increase in inventory. These increases were partially offset by decreases in fashion and seasonal apparel and other inventory levels.

A reconciliation of GAAP to non-GAAP financial measures is included in the schedules accompanying the consolidated financial statements in this release.

Outlook

The Company’s 2017 full year guidance, which includes the expected impact of store closures, is as follows:

  • Comparable store sales: expected to be -1% to +1%;
  • Gross margin: expected to be up 20 to 40 basis points versus 2016;
  • SG&A dollars: expected to be down 1 to 2% versus 2016;
  • Adjusted earnings per share1: expected to be $0.40 to $0.65.

1 A reconciliation of non-GAAP forward-looking projections to GAAP financial measures is not available as the nature or amount of potential adjustments, which may be significant, cannot be determined at this time.

(Editor’s Note: This morning, JCPenney, Inc. also issued a separate news release announcing plans to optimize retail operations, advance growth and drive profitability)

Fourth Quarter and Full Year Earnings Conference Call Details

At 8:30 a.m. ET today, the Company will host a live conference call conducted by chairman and chief executive officer Marvin R. Ellison and chief financial officer Ed Record. Management will discuss the Company’s performance during the quarter and take questions from participants. To access the conference call, please dial (844) 243-9275, or (225) 283-0394 for international callers, and reference 66598627 conference ID or visit the Company’s investor relations website at http://ir.jcpenney.com. Supplemental slides will be available on the Company’s investor relations website approximately 10 minutes before the start of the conference call.

Telephone playback will be available for seven days beginning approximately two hours after the conclusion of the conference call by dialing (855) 859-2056, or (404) 537-3406 for international callers, and referencing 66598627 conference ID.

Investors and others should note that we currently announce material information using SEC filings, press releases, public conference calls and webcasts.  In the future, we will continue to use these channels to distribute material information about the Company and may also utilize our website and/or various social media to communicate important information about the Company, key personnel, new brands and services, trends, new marketing campaigns, corporate initiatives and other matters.  Information that we post on our website or on social media channels could be deemed material; therefore, we encourage investors, the media, our customers, business partners and others interested in our Company to review the information we post on our website as well as the following social media channels:

Any updates to the list of social media channels we may use to communicate material information will be posted on the Investor Relations page of the Company’s website at www.jcpenney.com.

About JCPenney:
J. C. Penney Company, Inc. (NYSE:JCP), one of the nation’s largest apparel and home furnishings retailers, is on a mission to ensure every customer’s shopping experience is worth her time, money and effort. Whether shopping jcp.com or visiting one of over 1,000 store locations across the United States and Puerto Rico, she will discover a broad assortment of products from a leading portfolio of private, exclusive and national brands. Supporting this value proposition is the warrior spirit of over 100,000 JCPenney associates worldwide, who are focused on the Company’s three strategic priorities of strengthening private brands, becoming a world-class omnichannel retailer and increasing revenue per customer. For additional information, please visit jcp.com.

Forward-Looking Statements
This release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expect” and similar expressions identify forward-looking statements, which include, but are not limited to, statements regarding sales, gross margin, selling, general and administrative expenses, earnings and cash flows. Forward-looking statements are based only on the Company’s current assumptions and views of future events and financial performance. They are subject to known and unknown risks and uncertainties, many of which are outside of the Companys control that may cause the Company’s actual results to be materially different from planned or expected results. Those risks and uncertainties include, but are not limited to, general economic conditions, including inflation, recession, unemployment levels, consumer confidence and spending patterns, credit availability and debt levels, changes in store traffic trends, the cost of goods, more stringent or costly payment terms and/or the decision by a significant number of vendors not to sell us merchandise on a timely basis or at all, trade restrictions, the ability to monetize non-core assets on acceptable terms, the ability to implement our strategic plan including our omnichannel initiatives, customer acceptance of our strategies, our ability to attract, motivate and retain key executives and other associates, the impact of cost reduction initiatives, our ability to generate or maintain liquidity, implementation of new systems and platforms including EMV chip technology, changes in tariff, freight and shipping rates, changes in the cost of fuel and other energy and transportation costs, disruptions and congestion at ports through which we import goods, increases in wage and benefit costs, competition and retail industry consolidations, interest rate fluctuations, dollar and other currency valuations, the impact of weather conditions, risks associated with war, an act of terrorism or pandemic, the ability of the federal government to fund and conduct its operations, a systems failure and/or security breach that results in the theft, transfer or unauthorized disclosure of customer, employee or Company information, legal and regulatory proceedings and the Companys ability to access the debt or equity markets on favorable terms or at all. There can be no assurances that the Company will achieve expected results, and actual results may be materially less than expectations. Please refer to the Company’s most recent Form 10-Q for a further discussion of risks and uncertainties. Investors should take such risks into account and should not rely on forward-looking statements when making investment decisions. Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. We do not undertake to update these forward-looking statements as of any future date.

Media Relations:
(972) 431-3400
jcpnews@jcp.com
Follow us @jcpnews

Investor Relations:
(972) 431-5500
jcpinvestorrelations@jcpenney.com

Facebook (https://www.facebook.com/jcp)

Twitter (https://twitter.com/jcpnews).

Source: J. C. Penney Company, Inc.

JCPenney to close two distribution facilities and approximately 130 – 140 stores to optimize its retail operations

PLANO, Texas, 2017-Feb-27 — /EPR Retail News/ — J. C. Penney Company, Inc. (NYSE: JCP) today (Feb. 24, 2017) announced it is implementing a plan to optimize its national retail operations as part of the Company’s successful return to profitability. Under the plan, the Company expects to close two distribution facilities and approximately 130 – 140 stores over the next few months. These strategic decisions will help align the Company’s brick-and-mortar presence with its omnichannel network, thereby redirecting capital resources to invest in locations and initiatives that offer the greatest revenue potential.

“In 2016, we achieved our $1 billion EBITDA target and delivered a net profit for the first time since 2010; however, we believe we must take aggressive action to better align our retail operations for sustainable growth. During the year, it became evident the stores that could fully execute the Company’s growth initiatives of beauty, home refresh and special sizes generated significantly higher sales, and a more vibrant in-store shopping environment,” said Marvin R. Ellison, chairman and chief executive officer of JCPenney. “We believe the relevance of our brick and mortar portfolio will be driven by the implementation of these initiatives consistently to a larger percent of our stores. Therefore, our decision to close stores will allow us to raise the overall brand standard of the Company and allocate capital more efficiently.”

“We understand that closing stores will impact the lives of many hard working associates, which is why we have decided to initiate a voluntary early retirement program for approximately 6,000 eligible associates. By coordinating the timing of these two events, we can expect to see a net increase in hiring as the number of full-time associates expected to take advantage of the early retirement incentive will far exceed the number of full-time positions affected by the store closures,” added Ellison.

“We believe closing stores will also allow us to adjust our business to effectively compete against the growing threat of online retailers. Maintaining a large store base gives us a competitive advantage in the evolving retail landscape since our physical stores are a destination for personalized beauty offerings, a broad array of special sizes, affordable private brands and quality home goods and services. It is essential to retain those locations that present the best expression of the JCPenney brand and function as a seamless extension of the omnichannel experience through online order fulfillment, same-day pick up, exchanges and returns,” said Ellison.

“While many pure play e-commerce companies are experiencing dramatically increasing fulfillment costs, we are pleased with the double digit growth of jcpenney.com and how leveraging our brick and mortar locations is enabling us to offset the last-mile delivery cost. We believe the future winners in retail will be the companies that can create a frictionless interaction between stores and e-commerce, while leveraging physical locations to minimize the growing operational costs of delivery. In fact, in 2016 approximately 75% of all online orders touched a physical store. Even with a reduced store count, JCPenney is competitively positioned to deliver a differentiated department store model that meets the expectations of a digital world with an inspiring, tangible shopping environment,” Ellison added.

As a result of the store actions, JCPenney will close a distribution center located in Lakeland, Fla. in early June, at which time operations will transfer to the Company’s logistics facility in Atlanta as part of a strategic effort to streamline store support services. The Company also is in the process of selling its supply chain facility in Buena Park, Calif. in an effort to monetize a lucrative real estate asset.

Associates who will be impacted by the store and distribution center closures will receive separation benefits, which includes assistance identifying other employment opportunities and outplacement services such as resume writing and interview preparation.

Eligibility for the Voluntary Early Retirement Program (VERP) will generally include home office, stores and supply chain personnel who met certain criteria related to age and years of service as of Jan. 31. Approximately 6,000 associates are eligible for the program. Current costs and future savings will be based on the number of associates who accept on or before March 17 when the consideration period expires. The Company’s qualified pension plan will remain in a well-funded status post VERP. No cash contributions to the pension plan are anticipated for the foreseeable future. Charges related to the VERP, of which the vast majority will be non-cash, will be reported in the Company’s first quarter fiscal 2017 results.

FINANCIAL IMPACT
The total store closures represent approximately 13 – 14 % of the Company’s current store portfolio, less than 5% of total annual sales, less than 2% of EBITDA and 0% of net income. The stores identified for closure either require significant capital to achieve the Company’s new brand standard or are minimally cash flow positive today relative to the Company’s overall consolidated average. Comparable sales performance for the closing stores was significantly below the remaining store base and these stores operate at a much higher expense rate given the lack of productivity. Once cycled, these closures are expected to be net income neutral.

The annual cost savings resulting from these strategic decisions, primarily occupancy, payroll, home office support, corporate administration and other store-related expenses, are estimated at approximately $200 million. During the first half of 2017, the Company expects to record an estimated pre-tax charge of approximately $225 million, primarily lease termination obligation expenses, non-cash asset impairments and transition costs, in connection with this initiative.

The Company plans to release a full list of planned closures in mid-March pending notification of all affected personnel. Nearly all impacted stores are expected to close in the second quarter of 2017.

“I have a deep appreciation and respect for our associates who are on the front lines working tirelessly to serve our customers every day. Closing a store is never an easy decision, especially given the local impact on valued employees and our most loyal shoppers,” said Ellison. “While any actions that reduce or exclude our presence in communities across the country is always difficult, it is essential that JCPenney continues to evolve in order to achieve long-term growth and profitability and deliver on shareholder value.”

About JCPenney:
J. C. Penney Company, Inc. (NYSE:JCP), one of the nation’s largest apparel and home furnishings retailers, is on a mission to ensure every customer’s shopping experience is worth her time, money and effort. Whether shopping jcp.com or visiting one of over 1,000 store locations across the United States and Puerto Rico, she will discover a broad assortment of products from a leading portfolio of private, exclusive and national brands. Supporting this value proposition is the warrior spirit of over 100,000 JCPenney associates worldwide, who are focused on the Company’s three strategic priorities of strengthening private brands, becoming a world-class omnichannel retailer and increasing revenue per customer. For additional information, please visit jcp.com.

Forward-Looking Statements
This release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “expect” and similar expressions identify forward-looking statements, which include, but are not limited to, statements regarding sales, gross margin, selling, general and administrative expenses, earnings and cash flows. Forward-looking statements are based only on the Company’s current assumptions and views of future events and financial performance. They are subject to known and unknown risks and uncertainties, many of which are outside of the Companys control that may cause the Company’s actual results to be materially different from planned or expected results. Those risks and uncertainties include, but are not limited to, general economic conditions, including inflation, recession, unemployment levels, consumer confidence and spending patterns, credit availability and debt levels, changes in store traffic trends, the cost of goods, more stringent or costly payment terms and/or the decision by a significant number of vendors not to sell us merchandise on a timely basis or at all, trade restrictions, the ability to monetize non-core assets on acceptable terms, the ability to implement our strategic plan including our omnichannel initiatives, customer acceptance of our strategies, our ability to attract, motivate and retain key executives and other associates, the impact of cost reduction initiatives, our ability to generate or maintain liquidity, implementation of new systems and platforms including EMV chip technology, changes in tariff, freight and shipping rates, changes in the cost of fuel and other energy and transportation costs, disruptions and congestion at ports through which we import goods, increases in wage and benefit costs, competition and retail industry consolidations, interest rate fluctuations, dollar and other currency valuations, the impact of weather conditions, risks associated with war, an act of terrorism or pandemic, the ability of the federal government to fund and conduct its operations, a systems failure and/or security breach that results in the theft, transfer or unauthorized disclosure of customer, employee or Company information, legal and regulatory proceedings and the Companys ability to access the debt or equity markets on favorable terms or at all. There can be no assurances that the Company will achieve expected results, and actual results may be materially less than expectations. Please refer to the Company’s most recent Form 10-Q for a further discussion of risks and uncertainties. Investors should take such risks into account and should not rely on forward-looking statements when making investment decisions. Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. We do not undertake to update these forward-looking statements as of any future date.

Media Relations:
(972) 431-3400
jcpnews@jcp.com
Follow us @jcpnews

Investor Relations:
(972) 431-5500
jcpinvestorrelations@jcpenney.com

Source: J. C. Penney Company, Inc.

24,428 Pets adopted during PetSmart Charities’ first National Adoption Weekend of 2017

PHOENIX, 2017-Feb-27 — /EPR Retail News/ — This past weekend, North Americans opened their hearts and their homes to more than 24,000 adoptable pets who were looking for their forever families during PetSmart Charities’ first National Adoption Weekend of 2017—hosted at over 1,500 PetSmart stores across the continent.  This weekend event ranks among the top most successful adoption events for the leading pet specialty retailer and the leading funder of animal welfare.

“We are thrilled by the continued success of our National Adoption Weekend event where 24,428 pets’ lives were saved,” said Eran Cohen, chief customer experience officer at PetSmart. “Through this powerful effort between PetSmart Charities, PetSmart stores, our associates and thousands of adoption partners from coast to coast, we continue our commitment to helping pets find their forever homes and to serve as a trusted partner to new pet parents everywhere.”

Four times each year, PetSmart teams up with PetSmart Charities and more than 3,000 animal welfare organizations on National Adoption Weekends to bring adoptable pets into PetSmart stores to find them the forever homes they deserve.  While often referred to as National Adoption “Weekend,” the adoption efforts span the entire week with the majority of the pets – 23,000 on average – adopted between Friday and Sunday.  PetSmart, The Adopt Spot, has helped to facilitate over 7.3 million adoptions to date, more than any other brick-and-mortar organization.  For every 30 seconds a PetSmart store is open, a pet is adopted, totaling 1,400 pets’ lives saved every day.

“We are excited to report the success of our first National Adoption Weekend event of the New Year to kick off our lifesaving efforts in 2017,” said David Haworth, DVM, Ph.D., president of PetSmart Charities.  “Pet adoption continues to be key to our mission to end pet homelessness and connect people and pets across the United States and Canada.  We look forward to saving even more lives as the year progresses.”

Did You Adopt This Weekend?

New pet parents who wish to share their heartwarming adoption stories and photos with their new four-legged family member are encouraged to use the hashtag #iadopted on Facebook, Twitter or Instagram. The next PetSmart Charities National Adoption Weekend will be held on May 5-7, 2017.

PetSmart’s Adoption Kit

As a gift to those who saved a life through adoption, no matter where they choose to adopt their pet, PetSmart offers a free Adoption Kit* that provides useful content on how to integrate a pet into the family while offering true value – more than $450 in savings.  Included are coupons for a free bag of dog or cat food from Simply Nourish™, Authority® or Good Natured™, a free veterinarian visit, a complimentary private training session with an accredited trainer, a free Doggie Day Camp session and a free overnight boarding stay, as well as half off on a grooming service.  Also included are savings on all the essentials for a new pet, including beds, crates, gates, brushes, feeding bowls, collars, leashes, toys and treats, as well as solutions like pet calming products and stain and odor remedies for any mishaps that may occur.

*Adoption paperwork is required.

About PetSmart®

PetSmart, Inc. is the largest specialty pet retailer of services and solutions for the lifetime needs of pets. At PetSmart, we love pets, and we believe pets make us better people. Every day with every connection, PetSmart’s passionate associates help bring pet parents closer to their pets so they can live more fulfilled lives. This vision impacts everything we do for our customers, the way we support our associates and how we give back to our communities. We employ approximately 53,000 associates, operate 1,500 pet stores in the United States, Canada and Puerto Rico and 203 in-store PetSmart® PetsHotel® dog and cat boarding facilities. PetSmart provides a broad range of competitively priced pet food and pet products and offers dog training, pet grooming, pet boarding, PetSmart Doggie Day Camp day care services and pet adoption services in-store. Our portfolio of digital resources for pet parents – including PetSmart.com, PetFoodDirect.com, Pet360.com and petMD.com – offers the most comprehensive online pet supplies and pet care information in the U.S.  Through our in-store pet adoption partnership with independent nonprofit organizations, PetSmart Charities® and PetSmart Charities™ of Canada, PetSmart helps to save the lives of more than 500,000 homeless pets each year.  The Adopt Spot is a trademark of PetSmart, Inc.

Follow PetSmart on Twitter: @PetSmart 
Find PetSmart on Facebook: www.facebook.com/PetSmart
See PetSmart on YouTube: www.YouTube.com/PetSmart

About PetSmart Charities®

PetSmart Charities, Inc. is a nonprofit animal welfare organization that saves the lives of homeless pets.  Each year nearly 500,000 dogs and cats find homes through our adoption program in all PetSmart® stores across the U.S. and sponsored adoption events.  Each year millions of PetSmart shoppers contribute to pets in need by making donations directly to PetSmart Charities on a pin pad at the registers in PetSmart stores.  PetSmart Charities administers and efficiently uses 90 cents of every dollar of the generous donations by issuing grants and providing additional support to help pets in need.  PetSmart Charities grants more money to directly help pets in need than any other animal welfare group in North America, with a focus on funding adoption and spay/neuter programs that help communities solve pet overpopulation.  PetSmart Charities is a 501(c)(3) organization, independent from PetSmart, Inc.  PetSmart Charities has received the Four Star Rating for the past 13 years from Charity Navigator, an independent nonprofit that reports on the effectiveness, accountability and transparency of nonprofits, placing it among the top one percent of charities rated by this organization.

About PetSmart Charities™ of Canada

PetSmart Charities of Canada is a nonprofit animal welfare organization that saves the lives of homeless pets in Canada.  Each year more than 25,000 pets find Canadian homes through our adoption program in nearly all PetSmart stores across Canada and our sponsored adoption events. A leading funder of animal welfare, PetSmart Charities of Canada has granted more than $10 million to help pets in need with a funding focus on adoption and spay/neuter programs that help communities solve pet overpopulation and emergency relief grants that help pets and pet parents impacted by natural and man-made disasters.  PetSmart Charities of Canada is a registered Canadian charity, independent from PetSmart.

Contacts:
PetSmart Media Line:
623-587-2177

Source: PetSmart Inc.