Financial Reports: Penney, Staples

J.C. Penney Improves Profitability
Lower expenses helped boost the fourth-quarter earnings of Plano, TX-based J.C. Penney Corp. (NYSE:JCP) above expectations. The catalog/retailer reported net income of $333 million for the quarter ended Jan. 29, compared with a $1.1 billion loss a year ago. Most of the loss was attributed to the Eckerd Drugstore business, which Penney sold.

Fourth-quarter department stores and catalog/Internet sales fell 0.4%, to $6.07 billion, from $6.10 billion last year. The fourth-quarter of fiscal 2004 was a week shorter than that of 2003, however. For a comparable 13-week period, catalog/Internet sales increased 4% over last year. Internet sales increased 33%, and same-store sales rose 3%. Penney says its been able to drive sales through merchandise improvements, offsetting some of the negative impact on its lower income customers hurt by higher gas prices.

For the year, department store and direct sales were $18.42 billion, up nearly 4% from 2003’s $17.79 billion. And Penney reported net income for the year of $524 million, a turnaround from a net loss of $928 million the previous year.

Delivery Unit Strong at Staples
Framingham, MA-based catalog/retailer Staples (Nasdaq: SPLS) rode increased sales to strong profits for the fiscal year and fourth quarter ended Jan. 29.

For fiscal 2004, sales were $14.45 billion, an 11% increase from 2003. Net income increased 41%, to $708.4 million, on a GAAP basis from 2003. The company had incurred a $62 million noncash adjustment net of taxes in the first quarter of 2003. On a pro forma basis, net income increased 28%.

Sales of its North American Delivery Business—which includes the Staples and Quill catalog and online businesses as well as the Staples contract delivery business—increased 14%, to $4.20 billion from $3.70 billion the previous year. North American comparable store sales increased 4%.

For the fourth quarter, total company sales grew 13%, to $4.08 billion from $3.61 billion for fiscal 2003. Net income increased 19%, to $251.3 million.

Fourth-quarter North American Delivery sales increased 19%, to $1.12 billion. Same store sales rose 4% compared with last year.

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Financial Reports: Penney, Staples

Eckerd a Drag on Penney Financials

Thanks to a $77 million charge relating to its now-sold Eckerd Drugstore unit, first-quarter net income at Plano, TX-based cataloger/retailer J.C. Penney (NYSE: JCP) fell 33%, to $41 million from $61 million last year. Combined department store and catalog/Internet sales increased 9%, however, to $4.0 billion from $3.7 billion last year.

The Eckerd unit notwithstanding, first-quarter operating profit was $229 million, more than twice the $84 million posted last year. Internet sales increased about 45% for the quarter. Comparable department store sales increased 10%.

Penney sold its Eckerd drugstore operations last month in two parts, to Longueuil, Quebec-based Jean Coutu Group for $3.76 billion and to CVS Corp. for $2.15 billion.

Staples Delivery Business Up 11%
Framingham, MA-based office supplies cataloger/retailer Staples enjoyed growth on both sides of the ledger. Total first-quarter sales increased 12%, to $3.45 billion for the three months ended May 1. Sales in its North American Delivery unit, which includes the Staples, Quill, and Medical Arts Press catalogs, rose 11%, to $1.0 billion. Income from the North American Delivery unit increased 24%, to $73.1 million.

North American comparable store sales increased 5%. Income from the North American Retail unit increased 40%, to $106.1 million.

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