Plano, TX, May 18--J.C. Penney Co Inc. reported lower quarterly net profit, hurt by charges from the sale of the Eckerd drugstore chain, although sales rose almost 9%.
Chief Executive Allen Questrom said he's "optimistic" about improvement in the economy and consumer spending, but said he is planning sales and operating profits conservatively due to economic and geopolitical issues.
The Plano, TX based company said it earned $41 million, or 13 cents per share, in the first quarter, compared with $61 million, or 20 cents a share, a year earlier.
Excluding the charges, profit from continuing operations rose to 38 cents per share from five cents per share. Earlier this month, the company had forecast first-quarter earnings of 30 cents to 35 cents per share.
Analysts, on average, had been expecting it to earn 34 cents per share, according to Reuters Research, a unit of Reuters Plc.
Questrom forecast second-quarter sales to increase in the low-single digits for both comparable department stores and catalog/Internet sales, and earnings to be about six cents per share, in line with the analysts' average, according to Reuters Research.
"Questrom has turned around a blue-haired old ladies store into a hot, fun, easily shoppable environment," said Bill Dreher, an analyst with Deutsche Bank who has a "hold" rating on the shares. "They've been very true to their price points while offering fun fashion."
Dreher sees J.C. Penney as the leader in moderately priced apparel retailers now, but said its biggest challenges are getting investment-grade debt status so it can buy back shares, and speeding up the rollout of new freestanding stores.
J.C. Penney said retail sales for the first quarter rose 8.7% to about $4.03 billion, while sales at department stores open at least a year, or same-store sales, rose 9.5%. Catalog/Internet sales rose 6.5%.
Last month, J.C. Penney agreed to sell its Eckerd drugstores for nearly $4.53 billion in a deal split between Canadian drugstore chain Jean Coutu Group and CVS Corp., the No. 2 U.S. drugstore chain. The company has said it plans to use the proceeds for stock and debt buybacks.
