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Through the Earnings Mirror: JCPenney’s Mixed Fiscal 4Q16 Results

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Through the Earnings Mirror: JCPenney’s Mixed Fiscal 4Q16 Results PART 1 OF 5

Behind JCPenney’s Improved Earnings in Fiscal 4Q16

Continued improvement

JCPenney (JCP) delivered adjusted EPS (earnings per share) of $0.64 in fiscal 4Q16, which ended on January 28, 2017. JCP beat the consensus analyst estimate of $0.61.

JCPenney announced its fiscal 4Q16 and fiscal 2016 results on February 24, 2017. The company was able to meet its own EBITDA1 guidance of $1 billion for fiscal 2016.

Behind JCPenney’s Improved Earnings in Fiscal 4Q16

Behind JCPenney’s Improved Earnings in Fiscal 4Q16

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Earnings drivers

JCPenney’s (JCP) adjusted EPS improved 64.1% on a year-over-year basis in fiscal 4Q16. Despite lower sales, this improvement in JCPenney’s 4Q16 earnings was due to the company’s cost reduction efforts. The company’s selling, general, and administrative (or SG&A) expenses were down 3.9% in fiscal 4Q16 due to lower incentive compensation and store-controllable costs.

JCP’s adjusted EPS in 4Q16 excluded one-time items like restructuring and management transition charges, a mark-to-market adjustment for supplemental retirement plans, and the tax impact arising from comprehensive income allocation.

For fiscal 2016, JCP posted adjusted earnings per share of $0.08 compared to -$1.03 in fiscal 2015. The company’s turnaround efforts helped it deliver a net profit, including one-time items, for the first time since 2010.

The adjusted EPS of Macy’s (M) and Kohl’s (KSS) declined 3.4% and 8.9%, respectively, in fiscal 4Q16, mainly due to lower sales.

Earnings outlook

JCPenney (JCP) expects its adjusted EPS to range from $0.40–$0.65 in fiscal 2017, compared with its adjusted EPS of $0.08 in fiscal 2016. Given the tough retail environment, the company could enhance its earnings through its cost control and efficiency measures.

We’ll discuss JCPenney’s sales in the next part of this series.

  1. earnings before interest, tax, depreciation, and amortization
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