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RAPAPORT...
J.C. Penney Company Inc. reported that its first-quarter sales fell 20 percent year on year to $3.15 billion for the three months that ended on April 28. Same-store sales fell 18.9 percent. Gross margin as a percentage of sales fell to 37.6 percent from 40.5 percent. The retailer reported a net loss of $163 million, which included an adjusted net loss of $55 million plus $76 million in extensive markdowns and restructuring costs related to its overhaul strategy underway. One year ago, the retailer reported net profit of $64 million. Ron Johnson, the chief executive of JCPenney, remained optimistic and said that even though sales and profitability have been tougher than anticipated, the company's re-invention strategy is ahead of schedule. ''Customers love the new jcp they discover in our stores,'' Johnson said. ''Our shop strategy has been applauded by vendor and design partners, our merchants have stepped up to the challenge of improving our merchandise and presentation, we have dramatically simplified our business model and reorganized our teams at headquarters and in our stores. While we have work to do to educate the customer on our pricing strategy and to drive more traffic to our stores, we are confident in our vision to become America's favorite store. We fully expect that the bold and strategic changes we are making to our operations will result in improved profitability and sustainable growth over the long term.'' JCPenney anticipates that it will incur additional restructuring charges throughout the fiscal year as it takes aggressive action to simplify its operations and infrastructure. In addition, as the company continues to transform its merchandise assortment to align with its new strategy, it may incur additional inventory write-downs as it exits certain lines of merchandise. As a result of those impacts, JCPenney no longer expects to meet its annual GAAP earnings guidance of $1.59 per share, but affirms its non-GAAP earnings guidance of $2.16 per share, which excludes non-cash qualified pension expense, restructuring charges and markdown reserves as it transitions merchandise assortment. Additionally, the company will discontinue the 20 cents per share quarterly dividend and on an annual basis that change will result in cash savings of approximately $175 million.
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