PLANO, TX-Despite the economic downturn, JC Penney is still on track to have 17 new stores up and running by the end of 2009. The capital expenditure on the store openings will be $600 million.
Furthermore, the retailer plans to accelerate the opening of its Sephora brand division. The "store-within-a-store" concept sells national brands of makeup, skin care, fragrance and accessories.
"We're quite encouraged by existing stores we've put Sephora in," said JC Penney chairman and CEO Myron E. Ullman at JCPenney's Q1 2009 earnings conference call. He added that the company anticipates having 155 Sephoras inside JC Penney open by the end of the year. "It's something that's new and exciting, and something the customer responds to," Ullman said.
Meanwhile, on the balance sheet, JC Penney's figures were still down, with net income at $25 million at the end of the first quarter of 2009 versus $120 million during the same period a year ago. However, according to a release from the company, the earnings were impacted by a pre-tax negative swing in a non-cash qualified pension plan expense of $114 million. But Ken C. Hicks, company president and chief merchandising officer was encouraged by the results.
"The first quarter results were ahead of estimates," he commented. "We're continuing to aggressively manage our operating expenses, and it showed." Furthermore, he commented, women's apparel did very well, as customers responded to spring fashions.
The corporate guidance for the second quarter, however, continues on a downward trend. The release notes that total sales are likely to decrease 7% to 10%, with comparable same-store sales also decreasing a maximum of 12%. Operating income is also anticipated to decrease, as pre-opening expenses top $12 million.
Though the guidance takes into account the fact that the nation is still in a recession, Ullman acknowledged he's seeing somewhat more stability and predictability in the market and in buying trends. Furthermore, "we're fortunate," he added. "We're opening stores, not closing them."
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