- The Washington Times - Wednesday, May 15, 2002

J.C. Penney Co. Inc.'s first-quarter profits more than doubled as the nation's second-largest department store chain continues to turn around its once-ailing business.
The Plano, Texas, retailer, on a restructuring mission for more than a year, recently changed its merchandise, marketing and in-store look to attract more customers.
"The most important thing about the story is J.C. Penney is changing its image and what it has inside the store," Joseph Zock, president and chief investment officer of Capital Management Associates, told Bloomberg News. "They have the right merchandise on the shelves, and that's different from J.C. Penney two years ago."
The 100-year-old company is in its second year of a five-year restructuring plan that includes cutting costs, centralizing operations and upgrading the look of the stores and the fashions inside.
"They have made their stores more attractive," said Kurt Barnard of Barnard's Retail Trend Report in New Jersey. "Their merchandise assortment is more in tune with what the customers want and what they buy at other stores."
Same-store sales at the company's department stores rose 7.9 percent in the first quarter, the fifth straight quarterly increase. Same-store sales, which measure sales at stores open at least a year, are considered the best gauge of a company's financial health.
"Results for the quarter exceeded Wall Street expectations and provide additional evidence that our turnaround is on track," Chief Executive Officer Allen Questrom said. "I am confident that we will return our operating profits to competitive levels during the next several years."
Net income hit $86 million (29 cents a share) for the first 13 weeks of the fiscal year ended April 27, compared with $41 million (13 cents) a year earlier.
Sales from the department stores and the catalog during the first quarter were just more than $4 billion, a 1.4 percent drop from the same quarter last year. Overall first-quarter sales, which include Eckerd drugstores, were up 2.7 percent to $7.7 billion.
The company's 2,643 Eckerd drugstores reported a 7.6 percent increase in same-store sales during the first quarter of fiscal 2003.
At the end of April, J.C. Penney owned 1,074 department stores nationwide, including 26 in Virginia and 18 in Maryland.
Since he took over the helm of the struggling retailer in September 2000, Mr. Questrom has closed about 45 stores and opened 18.
In recent years, J.C. Penney has been challenged with stiff competition from discount retailers such as Kohl's, Target and Wal-Mart and been set back by outdated stores and stale merchandise. It had been losing its value in customers' eyes and on Wall Street as the company struggled to survive in the mid-level department store market. In December 2000, shares plunged below $10.
Under the direction of its new chief executive, Mr. Questrom, last year the company sold off its Direct Marketing Services division to a U.S. subsidiary of insurance giant Aegon for about $1.3 billion in cash, which was used to pay off some of its debt.
The company is shaping up the stores, making it easier for customers to navigate them, as well as adding clearer signs highlighting prices and displaying brands.
In an effort to make shopping more convenient and faster for customers, J.C. Penney's will begin implementing central checkout counters at its entrances.
The company tested the idea in more than a dozen stores last year, which resulted in increased sales compared with sales at stores that had single registers scattered throughout the sales floor. More than 30 stores have the centralized checkouts, and the company plans to spend $50 million to install the checkouts in the rest of its stores by the end of the third quarter.
Its stock has been trading between $24 and $28 on the New York Stock Exchange for the past year. Shares rose $1.69 a share yesterday, closing at $24.89.

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