J.C. Penney Co. (JCP) Reports
But Doesn’t Impress Investors



J.C.Penney sign

May 14, 2010 - J.C. Penney Co. (JCP) is a holding company operates its business consisting of selling merchandise and services to consumers through its department stores and Direct, Internet/catalog channels.

J.C. Penney Co. (JCP) reported this morning that its first-quarter profit more than doubled to $60 million, or 25 cents a share, from $25 million, or 11 cents, a year earlier. Sales rose 1.2% to $3.93 billion from $3.88 billion. Excluding the pension plan expense, the company said it would have earned 40 cents a share. Analysts had predicted a profit of 25 cents per share.

The retailer forecast profit of 10 cents to 13 cents a share in the second quarter with comparable sales rising as much as 3%. It sees full-year earnings of $1.64 a share. The consensus estimate for the second quarter stands at 13 cents per share and $1.65 for the year.

Penney said home goods were the only area of the company's seven merchandise divisions that didn't have revenue gains. The strongest areas were men's, shoes and handbags and children's.

JCP chart

However, despite a well-presented earnings report that showed big improvements in sales and profits and analysts’ predictions being bested, didn’t seem to impress investors. There is a fear, on the street that the consumer comeback might not pick up steam.

This was not the only retail company, during the week, which posted big profit gains and then to see their shares fall. Nordstrom Inc., Kohl's Corp. and Macy's Inc. were set in the same boat as J.C. Penney, after positive reports.

Several factors seem to be weighing heavily on the retail sector, which are:-

• Believe that the jobs recovery is actually real. "I think Wall Street did get ahead of itself following March's blowout," said Ken Perkins, president of research firm RetailMetrics. "Retail management is trying to be cautious because they still don't know if the jobs recovery is for real."

• Concerns over the Greek debt crisis creating a global meltdown.

• Earnings expectations by Wall Street are getting in front of realism – particularly after the March sales increases, the biggest since March, 1999, according to the International Council of Shopping Centers. April.

• "We believe that the consumer is no longer in hiding, but they are being very pragmatic," Myron E. Ullman III, chairman and CEO, told investors Friday during a conference call. "We're keeping in mind that the economy and the consumer environment remain unpredictable."

Options traders, before the report was posted, according to the International Securities Exchange (ISE) had a slight preference for puts. During the past two trading weeks, 1.24 puts were purchased to open for every one call purchased to open. This ratio of puts to calls is higher than 66% of all those taken during the past year.


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