uploads///JCP Earnings

Will JCPenney Deliver Its Earnings Target for Fiscal 2016?


Jan. 11 2017, Published 12:13 p.m. ET

Improvement so far

JCPenney (JCP) was able to trim its losses in each of the first three quarters of fiscal 2016 on a YoY (year-over-year) basis. In fiscal 3Q16[1. Fiscal 3Q16 ended on October 29, 2016], the company reported an adjusted loss per share of $0.21 per share—compared to a loss of $0.46 in fiscal 3Q15. Despite lower sales, the improvement was driven by a rise in the company’s operating margin.

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Measures to improve profitability

Investments in growth initiatives and expenses associated with online sales are negatively impacting the company’s bottom line. JCPenney is taking several measures to improve its profitability. JCPenney is focusing on its private brands like Xersion and Okie Dokie, which carry higher margins than national brands.

The company is working to enhance its gross margin through supply chain optimization by aligning end-to-end supply chain functions and leveraging infrastructure to speed up deliveries and modernize replenishment.

Earnings expectations

On January 6, JCPenney reported a 0.8% fall in its 2016 holiday same-store sales. However, the company reaffirmed its EBITDA[1. Earnings before interest, tax, depreciation and amortization] guidance of $1 billion for fiscal 2016.

Currently, analysts expect the company to deliver adjusted EPS (earnings per share) of $0.61 in fiscal 4Q16—compared to an adjusted EPS of $0.39 in fiscal 4Q15. For fiscal 2016, analysts expect the company to deliver an adjusted EPS of $0.03—compared to an adjusted loss per share of $1.03 in fiscal 2015. JCP accounts for 0.3% of the iShares S&P Mid-Cap 400 Value ETF (IJJ).

Unlike for JCPenney, analysts aren’t expecting a YoY improvement in the fiscal 2016 bottom line of JCPenney’s peers. Currently, analysts expect Macy’s (M) adjusted EPS to fall 18.7% to $3.07 in fiscal 2016. Kohl’s (KSS) adjusted EPS is expected to fall 9.1% to $3.64 in fiscal 2016.

Let’s look at the analysts’ recommendations for JCPenney stock in the next part of this series.


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