01 Mar J.C. Penney’s Q4 Comps Expand 4.5 Percent
J. C. Penney Company Inc. reported comparable store sales grew 4.1 percent for the fourth quarter and 4.5 percent for the full year. This combination of strong sales growth, accelerated gross margins and disciplined expense reduction resulted in full year adjusted EBITDA of $715 million, a $435 million increase.
Marvin R. Ellison, chief executive officer, said, “We are very pleased with our performance for the fourth quarter and full year. Our focus on private brands, omnichannel and revenue per customer is clearly resonating as we continue to win market share in a competitive environment. We are also pleased that we delivered strong fourth quarter results while effectively managing our inventory, which finished the year up 2.6 percent. I would like to thank our over 100,000 associates who embrace our strategy and come to work each day focused on driving sales and providing excellent customer service.”
Ellison continued, “While significant work remains to regain our status as a world-class retailer, the company`s financial performance this year indicates we are on the right path to achieving our long-term financial objectives. Building on the momentum of 2015, and the positive trends of the mid-tier US customer, we now expect positive adjusted earnings in 2016, and EBITDA of $1 billion.”
Fourth Quarter Results
For the fourth quarter, which included a successful holiday season, JCPenney reported net sales of $4.0 billion compared to $3.9 billion in the fourth quarter of 2014. Comparable store sales rose 4.1 percent for the quarter.
Home, Sephora, Footwear, and Handbags were the company`s top performing merchandise divisions during the quarter. Geographically, all regions delivered comp sales gains over the same period last year with the best performance in the western and northeastern regions of the country.
For the fourth quarter, gross margin improved 30 basis points to 34.1 percent of sales. This acceleration was driven by improvements in our clearance and promotional selling margins.
SG&A expenses for the quarter were down $70 million to $962 million, or 24.1 percent of sales, representing a 240 basis point improvement from last year. These savings were primarily driven by lower controllable costs, more efficient advertising spend and reduced corporate overhead.
Adjusted EBITDA for the quarter was $381 million, a $108 million or 40 percent improvement from the same period last year.
Adjusted earnings per share were $0.39, after excluding charges associated with primary pension plan expense, restructuring costs and the loss on extinguishment of debt. Adjusted net income was $121 million, an improvement of $108 million or 831 percent.
Full Year Results
For the full year 2015, JCPenney reported net sales of $12.6 billion compared to $12.3 billion in 2014, a 3.0 percent increase. Comparable store sales rose 4.5 percent for the year.
For the year, gross margin increased 120 basis points to 36.0 percent from 34.8 percent in the prior year. SG&A decreased $218 million or 270 basis points compared to the prior year.
Adjusted EBITDA was $715 million, a $435 million or 155 percent improvement from last year.
Adjusted net loss improved $463 million to $315 million, or $(1.03) per share for the year.
Free cash flow was positive $131 million, an increase of over $74 million or 130 percent from last year. For the full year, liquidity improved $900 million, of which $500 million was used to pay down debt during the fourth quarter. At year end, liquidity was $2.5 billion compared to $2.1 billion last year.
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 2016 full year guidance is as follows:
- Comparable store sales: expected to increase 3 percent to 4 percent;
- Gross margin: expected to increase 40 to 60 basis points versus 2015;
- SG&A dollars: expected to decrease versus 2015;
- EBITDA: expected to be $1 billion;
- Adjusted earnings per share: expected to be positive;
- Free cash flow: expected to improve versus 2015.