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JCPenney’s Bottom Line Continued to Improve in 2Q16

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Nov. 20 2020, Updated 1:59 p.m. ET

Better-than-expected results

JCPenney (JCP) impressed investors in 2Q16 by trimming down its quarterly losses on a year-over-year basis. For fiscal 2Q16 ending on July 30, 2016, JCPenney reported an adjusted EPS (earnings per share) of -$0.05 in 2Q16. This was better than Wall Street analysts’ consensus estimate of -$0.14.

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What drove the improvement?

JCPenney’s delivered an adjusted EPS of -$0.05 in 2Q16—compared to -$0.40 in 2Q15. The marked improvement in JCPenney’s bottom line was driven by sales growth and cost management. We’ll discuss the company’s sales growth in the next part of this series.

The adjusted EPS in 2Q16 excludes the impact of a $34 million charge from the write-off of unamortized debt issuance costs associated with refinancing the company’s 2013 term loan.

JCPenney’s strategic initiatives helped improve its bottom line in all of the quarters in fiscal 2015 and in 1Q16. The iShares S&P Mid-Cap 400 Value ETF (IJJ) has 0.4% exposure to JCPenney.

JCPenney’s peers such as Macy’s (M) and Nordstrom (JWN) faced a decline in their 2Q16 adjusted EPS due to weak sales and growth investments. Macy’s reported a lower-than-expected fall of 15.6% in its 2Q16 adjusted EPS. Nordstrom’s 2Q16 adjusted EPS fell by 28% due to lower sales and falling margins. Kohl’s (KSS) reported 14% growth in its 2Q16 adjusted EPS despite lower sales.

EBITDA guidance reaffirmed

JCPenney’s adjusted EBITDA[1. Earnings before interest, tax, depreciation and amortization] improved by 69% to $233 million in 2Q16 on a YoY basis. Including restructuring charges and the proportional share of net income from the home office land joint venture, the company’s EBITDA improved by 59% to $229 million in 2Q16. JCPenney reaffirmed its guidance of an EBITDA of $1 billion in fiscal 2016.

We’ll discuss the company’s 2Q16 sales in the next part of this series.

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