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J.C. Penney Beats 4th-Quarter Earnings Projections Despite Poor Holiday Sales

J.C. Penney Co. Inc. (NYSE:JCP) released its fourth-quarter results before the opening bell on Feb. 27. Despite experiencing poor sales during the holiday season, the company still managed to beat analysts' earnings and revenue projections.

Sanpshot of the quarter

The Plano, Texas-based department store chain posted adjusted earnings of 13 cents per share, topping the anticipated loss of 6 cents. Revenue of $3.49 billion declined 7.7% on a year-over-year basis, but surpassed projections of $3.44 billion.


Comparable store sales decreased 7% in the reported quarter, which was lower than the 7.3% drop analysts were expecting. The comps decline was attributed to the company's exit from the appliance and in-store furniture categories as it shifts its focus to more profitable areas.

Focus on the women's apparel business

The department store is focusing its efforts on growing its women's appal business. This is evident from the fact the company has relaunched its in-house label, A.n.a., which emphasizes providing a variety of sizes in demin to fit all different body types. In addition, the company entered a partnership with ThredUp last August to add the online consignment company's used apparel and accessories to its offering at 30 of its stores.

Despite witnessing significant improvement in the women's apparel business in the reported quarter, the company predicts it will record further comps decline in 2020.

Store update

At the end of fiscal 2019, the company had 846 stores, of which approximately 72% were mall-based locations.

In fiscal 2020, J.C. Penney is planning to shut down at least six stores. Last year, it closed 18 department stores and nine furniture shops.

Looking forward

The department store also provided full-year 2020 guidance, which excludes the potentail impact from the coronavirus outbreak.

The company anticipates comps to be down between 3.5% and 4.5%. Cost of goods sold, as a rate of net sales, is forecasted to grow 100 to 130 basis points year over year. It also expects positive free cash flow for the full year.

Capital spending is projected to be $300 million.

Disclosure: I do not hold any positions in the stocks mentioned.

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This article first appeared on GuruFocus.