JCPenney’s Stock Rises by 14.7% on 4Q15 Earnings Beat



Earnings beat

JCPenney (JCP) impressed investors with strong 4Q15 results, which were announced on February 26. JCPenney reported adjusted EPS (earnings per share) of $0.39 for 4Q15 ended January 30, 2016. The company’s earnings were ahead of Wall Street analysts’ consensus estimate of $0.21 per share. JCPenney’s stock price shot up by 14.7% on the day the company announced its 4Q15 results.

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Earnings growth drivers

JCPenney’s adjusted EPS in 4Q15 grew to $0.39 from $0.04 in the comparable quarter of the previous year. The improvement in JCPenney’s earnings was driven by higher sales and improved gross margins. The company’s 4Q15 adjusted EPS excludes the impact of one-time items, such as charges associated with pension plan expenses, restructuring costs, and losses on the extinguishment of debt.

For fiscal 2015, the company reported an adjusted loss per share of $1.03, compared with an adjusted loss per share of $2.55 in fiscal 2014. The company’s fiscal 2015 adjusted EBITDA[1.earnings before interest, tax, depreciation, and amortization] improved by 155% to $715 million. The company’s fiscal 2015 adjusted EBITDA came in ahead of its management’s guidance of $645 million. The iShares Russell 1000 ETF (IWB) has 0.01% exposure to JCPenney.

Performance of peers

Macy’s (M) adjusted EPS fell 14.2% in 4Q15 due to lower sales and increased markdowns. Nordstrom (JWN) reported a 11.4% decline in its 4Q15 adjusted EPS due to the impact of growth investments, including the company’s expansion in Canada. The adjusted EPS of Kohl’s (KSS) declined by 13.7% in 4Q15 due to lower-than-expected sales and lower margins.

JCPenney’s turnaround strategy, which includes a focus on private brands and omnichannel capabilities, has helped revive the company’s sales. JCPenney is consistently improving its performance and is trying to move ahead of the tough times that started with some critical missteps under the leadership of the former chief executive officer Ron Johnson.

In this series on JCPenney’s 4Q15 results, we’ll discuss the company’s sales performance, expanding gross margins, growth initiatives, and stock price trends. The concluding part of this series will discuss the company’s outlook for fiscal 2016.


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