J.C. Penney Company, Inc Loses Less in Q3, Same Store Sales Flat

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J.C Penney Company, Inc (NYSE: JCP) reported a loss of 62 cents per share compared to analyst expectations of a loss of 78 cents per share. Sales came in at $2.764 billion, below the $2.8 billion expected.

Same store sales up 4.3% year to date, but flat year over year in the quarter.

EBITDA came in at $102 million but included a $88 million dollar benefit related to the gain of selling store assets. This was a $342 million improvement from the same quarter last year. The company ended the quarter with $1.9 billion in liquidity.

jcp

Improvement in Gross Margin and SG&A

The company recorded a 710 basis point improvement in gross margin and improved SG&A by $18 million. Gross margin was 36.6% of sales compared to 29.9% in the same period in 2013.

The company credited the significant improvement in the mix and margin of clearance sales over prior year quarter.

Closure of Debt Offering

The company completed a $400 million offering of senior unsecured notes with a yield of 8.125% due 2019. The company used the proceeds for a cash tender offers for approximately $327 million aggregate principal amount of its outstanding 6.875 % Medium-Term Notes due 2015, 7.65 % Debentures due 2016 and 7.95 % Debentures due 2017.

The company’s next debt maturity is August 2016.

Outlook

The company guides for comparable same store sales to increase between 2 to 4 percent, and gross margin to increase 500 to 600 basis points from last year for the 4th quarter.

For the full year, comparable same store sales are expected to rise 3.5 to 4.5 percent and free cash flow to be positive. The company expects liquidity of $2.1 billion at year end and Capital Expenditures to come in at $250 million, with Depreciation and amortization at $640 million.

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