J. C. Penney Company Inc. announced financial results for its fiscal third quarter ended October 27, 2012. For the quarter, jcpenney reported a net loss of $123 million or $0.56 per share. Excluding the net gain on the sales of non-core assets, restructuring and management transition charges, and non-cash primary pension plan expense, adjusted net loss for the quarter was $203 million or $0.93 per share.
Ron Johnson, chief executive officer of jcpenney said, "While the quarter overall was challenging, the performance of jcp's new brands and shops reinforces our conviction to transform jcpenney into a specialty department store. jcp is really a tale of two companies. By far the largest part of our store is the old jcpenney, which continues to struggle and experience significant challenges as evidenced by our third quarter results.
However, the new jcp, centered around the shop concept, is gaining traction with customers every day and is surpassing our own expectations in terms of sales productivity which continues to give us confidence in our long term business model."
Shops Update:
During the quarter, the Company opened shops under the Levi’s, Izod, Liz Claiborne, The Original Arizona Jean Co., and jcp brands. The Company also opened 38 Sephora inside jcpenney stores, bringing the total to 386. Currently, the Company has transformed approximately 7.2 million square feet of selling space into the shop format.
Third Quarter Results:
Comparable store sales for the third quarter declined 26.1 percent and total sales decreased 26.6 percent. Internet sales through jcp.com were $214 million in the third quarter, decreasing 37.3 percent from last year.
Gross margin was 32.5 percent of sales, compared to 37.4 percent in the same period last year. Gross margin was impacted by lower than expected sales in the quarter and a higher level of clearance merchandise sales.
The Company's SG&A expenses decreased $155 million compared to last year's third quarter.
For the third quarter, the Company incurred $34 million in restructuring and management transition charges. These charges comprised the following:
Home office and stores $4 million, or $0.01 per share; Store fixtures $18 million, or $0.05 per share; Supply chain $3 million, or $0.01 per share; Management transition $6 million, or $0.02 per share; Other $3 million, or $0.01 per share.
As a result of previous actions taken to reduce the workforce, the Company re-measured its pension plans during the quarter, which resulted in a reduction to non-cash primary pension plan expense of $27 million, bringing total primary pension plan expense in 2012 to $167 million.
The Company ended the third quarter with approximately $525 million in cash and cash equivalents on its balance sheet.
During the quarter, the Company opened seven new jcpenney stores, including four new stores and three relocations.
Sale of Non-Core Assets:
As part of jcpenney's strategy to monetize assets that are not core to its operations, the Company generated $279 million of cash from the sale of several non-core assets during the third quarter.
