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Fashion Jobs
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Reuters
Published
May 16, 2010
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JC Penney outlook weak; shares slip

By
Reuters
Published
May 16, 2010

By Phil Wahba

NEW YORK, May 14 (Reuters) - J.C. Penney Co Inc (JCP.N) became the latest department store operator to give a modest profit forecast on concerns a consumer recovery will remain tepid, sending its shares down nearly 3 percent.

JC Penney

Penney, whose sales growth coming out of the recession has lagged that of rivals, warned that consumer spending remains tentative.

"We know that our customers remain concerned about their budgets," Penney Chief Executive Myron Ullman said in a statement.

The chief executives of rival retailers Kohl's Corp (KSS.N) and Macy's Inc (M.N) each sounded similar notes of caution when they reported quarterly results earlier this week.

New data on the economy released this week also gave a mixed view of consumer sentiment. A U.S. Commerce Department report on Friday 14 May showed April retail sales rose more than expected, while job claims numbers issued on Thursday 13 May showed unemployment remained stubbornly high.

Last month, Ullman told analysts that Penney shoppers were "more exposed to the job market" than those of its rivals.

Looking forward, Penney expects second-quarter earnings to be in a range of 10 to 13 cents per share.

For the full year, Penney is forecasting a profit of $1.64 per share. Analysts have been expecting EPS of 13 cents for the second quarter and $1.65 for the full year.

On Thursday 13 May, Kohl's Corp (KSS.N) and Nordstrom Inc (JWN.N) issued modest profit forecasts for this year.

Penney forecast sales at stores open at least a year, a gauge of retail health known as same-store sales, would rise between 2.5 percent and 3 percent in its current second quarter, slower than its own five-year plan calling for same-store sales to rise by 5 percent per year through 2014.

Penney, based in Plano, Texas, said its first-quarter profit was $60 million, or 25 cents per share, more than double a profit of $25 million, or 11 cents per share, a year ago. The quarterly profit was in line with analysts' estimates.

BETTER MARGINS

Sales were up 1.2 percent to $3.93 billion, while sales at stores open at least year, or same-store sales, rose 1.3 percent during the quarter, which ended on May 1.

Penney's gross margins continued to benefit from lean inventories and rose 0.9 percentage points to 41.4 percent, while selling and administrative expenses rose due to store openings and minimum wage increases.

A key component of the department store sector's strategy has been to land exclusive lines, which are more profitable and lure shoppers.

The chief executives of Macy's and Kohl's also said this week that sales growth for department stores would have to come from stealing market share from each other.

Penney becomes the exclusive U.S. department store for the Liz Claiborne (LIZ.N) brand and Spanish fast-fashion retailer Mango in the autumn.

Shares were down 73 cents to $27.44 in early morning trading on the New York Stock Exchange. (Reporting by Phil Wahba, editing by Gerald E. McCormick, Dave Zimmerman)

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