Plano, TX, Feb. 26--J.C. Penney Co. Inc.on Thursday reported a net loss of $1.07 billion for the fourth quarter after devaluing its investment in its underperforming Eckerd drugstore chain, which is on the auction block.
Including Eckerd and its Mexican department store operations, both now classified as "discontinued operations," J.C. Penney reported a loss of $3.42 per share.
After stripping out Eckerd, the company posted better-than-expected fourth-quarter profit on strong holiday sales and tighter inventories.
On this basis, J.C. Penney, best known for its namesake department stores, earned 83 cents per share in the fourth quarter, compared with 58 cents a year earlier.
J.C. Penney had forecast earnings of about 80 cents per share. Analysts, on average, had also expected 80 cents, according to Reuters Research, a unit of Reuters Group Plc.
The company said it expects a "much better consumer environment" in 2004, especially in the first half, citing lower taxes and low interest rates.
"I am confident that we are on track to achieve our operating profit goal of six to eight percent of sales in 2005," Chief Executive Allen Questrom said in a statement.
For the first quarter, J.C. Penney said earnings from continuing operations are expected to be nine cents to 12 cents per share.
Retail sales for the fourth quarter rose to $6.1 billion from $5.74 billion, while sales at department stores open at least a year, or same-store sales, rose 3.2 percent. Catalog/Internet sales rose 8.7 percent.
For several months, J.C. Penney has been exploring options for its Eckerd chain. The unit, which accounts for about 45 percent of the company's total sales, faces problems in pricing, failure to keep merchandise in stock, and inconvenient store locations.
The company took a non-cash charge of $450 million in the fourth quarter to reflect its investment in Eckerd, as well as goodwill, at estimated fair value. It also posted a non-cash charge of $875 million from the deferred tax liability for the excess of fair value over the tax basis of Eckerd.
