J.C. Penney posts profit for gourth quarter, beats expectations

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Posted 2:57PM on Thursday, February 21, 2002

PLANO, Texas - Retailer J.C. Penney Co. said Thursday that it earned $95 million in the fourth quarter, a turnaround from huge losses a year ago despite flat sales. But it warned profits this year will fall short of expectations. Its shares sank more than 8 percent. Company officials said that lower income from the pension fund, which is heavily invested in stocks, would reduce earnings this year by about 25 cents per share. Penney, which has closed many department stores and laid off thousands of workers in the past year, said it earned 32 cents per share for the three months ended Jan. 26 after losing $580 million, or $1.26 a share, in the period a year ago. Excluding one-time charges, the company said it earned 35 cents per share in the fourth quarter. Analysts surveyed by Thomson Financial/First Call had expected Penney to earn 30 cents per share. Sales, however, fell to $9.54 billion from $9.57 billion a year earlier. But same-store sales, an important measure for retailers, rose 4 percent at its department stores and 5.7 percent at its Eckerd drug stores, the company said. Chairman and chief executive Allen Questrom said the company expected operating earnings to more than double this year, to between 85 and 95 cents per share. The consensus forecast of analysts surveyed by Thomson Financial/First Call was for earnings of 96 cents a share for this fiscal year, however. During a conference call, analysts peppered company officials with questions about the pension fund's impact on earnings in 2002. Wayne Hood, an analyst with Prudential Securities, said the company might have to make a cash contribution to meet its pension obligations if the stock market doesn't rally. Chief financial officer Robert Cavanaugh said the plan was well-funded and won't need a contribution in the next five years. Penney has made only four cash contributions to the pension plan in the past 18 years, he said. For the full fiscal year, Penney earned $98 million, or 32 cents a share, compared to a loss of $705 million, or $2.29 a share, in 2000. Sales rose slightly to $32 billion from $31.85 billion. Plano-based Penney owns about 1,075 department stores and about 2,600 Eckerds. In afternoon trading on the New York Stock Exchange, Penney shares were down 8.1 percent, or $1.91 a share, to $21.68.