Penney: No excuses, just great results
Department store chain reports 13% jump in first-quarter profit, ups full-year guidance by a nickel, sees 'opportunity' amid housing slump and gas price inflation.
NEW YORK (CNNMoney.com) -- Wal-Mart and Home Depot - shame on you!
While these two retail leaders and others continue to moan and groan about how weather, early Easter, gas prices and the housing slump have whacked their sales and profits, at least one retailer - J.C. Penney - didn't jump on the bandwagon.
Penney (Charts, Fortune 500), which operates mid-priced department stores as well as an Internet and catalog business, posted a 13 percent jump in its first-quarter profit Thursday despite what it said was a "challenging sales environment."
The Plano, Texas-based retailer reported earnings per share for the quarter of $1.04, compared with 89 cents a year earlier, beating analysts' forecasts by a penny, according to earnings tracker First Call.
Sales for the quarter came in at $4.35 billion, in line with analyst estimates. Sales at Penney stores open at least a year - a key measure of retail performance known as same-store sales - rose a moderate 2.2 percent.
The company also boosted its full-year profit guidance by a nickel to about $5.49 a share.
"After a weak start to the first-quarter [retail] earnings season, we regard Penney's as the first positive data point with the company beating both current and forward consensus expectations. We expect [Penney's] second-quarter same-store sales to be up between 1 to 6 percent with July being the biggest month given an extra week of back-to-school selling" Goldman Sachs analyst Adrianne Shapira wrote in a research note Thursday.
Earlier this week, Wal-Mart (Charts, Fortune 500) and Home Depot (Charts, Fortune 500) both delivered profit duds for the quarter, and warned about more trouble in the months ahead, as their consumers struggle with higher prices at the pump and less ability to pull money out of their homes.
Penney CEO Mike Ullman acknowledged that those same risks confront his chain's mostly low to mid-income consumers as well. At the same time, he told analysts during a conference call to discuss Penney's results that he wasn't inclined to talk about those "excuses."
"We don't use weather as an excuse. Despite the weather, we sold well in the weeks before Easter," Ullman said during the call which was monitored via Web cast in New York.
Moreover, Ullman said Penney actually sees more "opportunity" as the company's philosophy of "style and quality at smart prices" has become even more relevant to consumers amid the challenging sales environment.
What makes him confident that Penney can withstand any spending slowdown and also improve sales in the important second half of the year that includes the critical year-end holiday shopping period?
He listed a set of "differentiators" that set Penney apart from its competitors, including the company's focusing on private-label fashion and home furnishing brands, innovating cross-branding efforts such as introducing Sephora cosmetics areas in select Penney stores, launching exclusive products such as its new Ambrielle intimate apparel collection, remodeling older stores, and managing inventory.
The retailer's private-label brands currently account for 45 percent of its total merchandise assortment. "This is key to improving our gross profits," Ullman said.
Penney's first-quarter results were also a "testimony to how diligently we've managed inventory," Ullman said, adding that the company's efforts paid off resulting in higher quarterly profits even as sales slowed.
Citing an extra week in the back-to-school shopping calendar, Ullman said he was bullish about Penney's sales during July, August and September, which typically represents the second-most important sales period for retailers after Christmas.