J.C. Penney Earnings Trounce Forecasts

Department store operator J.C. Penney Co. Inc. (JCP) Thursday posted a 30 percent rise in fourth-quarter earnings from continuing operations, helped by higher same-store sales and gross margin improvement.

Earnings rose to $328 million, or $1.16 per share, from $253 million, or 83 cents a share, a year earlier and were well above analysts' average forecast of $1.11 a share as compiled by Reuters Estimates.

Penney said the strongest sales were in footwear, girls and infants clothing, sportswear and fashion jewelry.

"This is a very strong performance, and they're looking for continued operating momentum," said Deutsche Bank analyst Bill Dreher. "We think this is the most compelling broadline retailing stock out there."

Plano, Texas-based Penney said net income, including the effects of discontinued operations, was $1.17 per share in the quarter, ended Jan. 29, compared with a loss of $3.42 per share a year earlier.

Sales at department stores open at least a year, or same-store sales, rose 3 percent. The figure excludes the effect of an extra week in the year-earlier quarter.

Catalog and Internet sales rose 3.9 percent. The Internet component of sales jumped 33 percent and was the fastest growing sales channel, Penney said.

Overall sales inched down 0.4 percent to $6.07 billion but surpassed analysts' average forecast of $5.99 billion.

"J.C. Penney is really in a turnaround mode, thanks to (former Chief Executive Allen) Questrom (search), who has done a miracle job with that company," said Kurt Barnard, president of consultants Retail Forecasting Group. "Now they need to snare a younger, more fashionable consumer." Questrom retired in December.

Penney recently introduced new brands to attract middle-income shoppers and will launch an advertising campaign around those brands during the Academy Awards telecast on Sunday.

The company forecast earnings from continuing operations of 48 cents to 53 cents per share in the first quarter and $2.89 to $3.01 per share for the full year.

Analysts polled by Reuters Estimates are expecting 51 cents per share for the first quarter and $3.03 for the year.

Full-year earnings guidance includes charges of 8 cents a share associated with debt repurchases, and a charge of 5 cents a share related to employee stock options. The company will begin treating stock options as expenses in the first quarter.

Penney shares were off 39 cents at $43.76 on the New York Stock Exchange (search).