Financial Reports: Penney, Systemax, and More

Eckerd Drags on Penney’s Bottom Line

Plano, TX-based cataloger/retailer J.C. Penney (NYSE: JCP) reported a 35% drop in third-quarter net income, to $80 million from $123 million last year. The culprit: its Eckerd drugstore chain, which suffered a 56% decline in operating earnings.

Total Penney sales increased 1%, to $7.98 billion for the three months ended Oct. 25. Sales from the Penney stores and direct division rose nearly 1%, to $4.34 billion from $4.31 billion. The department store and catalog unit’s operating profits increased 22%.

Penney expects to decide by the end of the year if it will sell or spin off the Eckerd unit.

Systemax Turns a 3Q Profit
Port Washington, NY-based Systemax (NYSE: SYX ) posted net income of $1.9 million for the quarter ended Sept. 30. For the third quarter of last year, the manufacturer/marketer of computers and industrial and office supplies lost $727,000. Operating income increased from $1.6 million last year to $3.6 million (including a $1.3 million reversal in the third quarter of liabilities no longer required as a result of the settlement of litigation).

Net sales increased 9%, to $405.0 million from $372.1 million a year ago. Sales in North America grew 14%. Excluding the impact of a weaker U.S. dollar, European sales for the third quarter decreased 8% from a year ago.

Loss Widens at Sport Supply Group
Dallas-based institutional sporting goods cataloger Sport Supply Group (OTCBB: SSPY) reported a slight increase in third-quarter net revenue. For the three months ended Sept. 26, sales totaled $25.9 million, compared with $25.5 million for the comparable quarter of last year.

The sales increase didn’t help the bottom line, however. The company lost $290,257 for the quarter, compared with $22,225 a year ago. During the quarter just ended, Sport Supply began closing some of its team dealer operations, with the sale of substantially all the assets of its dealer in Little Rock, AR. This sale resulted in a year-to-date after-tax charge to earnings of $289,000.

Too Blames Slumping Sales on Product Misjudgment
New Albany, OH-based cataloger/retailer Too (NYSE: TOO ) blamed its 58% drop in third-quarter earnings and its 10% tumble in sales largely on poor merchandise selection. The company said its poor-performing back-to-school apparel assortment incorporated styles and colors prevalent in junior fashions but not popular with Too’s core “tween” customer—girls ages 8-13. For the three months ended Nov. 1, Too netted $4.5 million on sales of $148.9 million. For the third quarter of last year, it had net income of $10.8 million on sales of $164.6 million. Comparable-store sales declined 17%.

Net Losses Increase at Bluefly
The third-quarter net loss at New York-based Bluefly (Nasdaq: BFLY) increased 13%, despite a 30% increase in net sales. For the quarter, the online marketer of discounted designer apparel and home accessories lost $2.5 million on $8.2 million in sales. For the third quarter of last year, Bluefly had lost $2.2 million on sales of $6.3 million.

“There were two principal drivers [in the quarter]: the 31.8% increase in new customers acquired and the increased savings we offered our customers,” CEO Ken Seiff said in a statement. “The increased savings to the customer were intended to help reduce inventory from prior quarters and adversely affected gross margins. While this reduction in margin did result in an increased net loss for the quarter, it enabled us to successfully liquidate over $3 million of inventory from previous quarters.”

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