Shares of J. C. Penney Co. Inc. (JCP: Quote) soared over 15 percent on Thursday, after the retailer detailed a strong guidance for the full year 2012 and revealed plans beginning next month to lure more customers, cut costs and boost earnings, even as the U.S. economy shows slight signs of recovery.
J. C. Penny provided a strong guidance, expecting fiscal year 2012 results to meet or exceed 2010 adjusted earnings of $2.16 per share, or $1.59 per share on a GAAP reporting basis. Street analysts currently expect earnings of $1.25 per share for the year. Analysts' estimates typically exclude special items.
At the second day of the J.C. Penney's launch event in New York, Chief Operating Officer Mike Kramer expanded on CEO Ron Johnson's profit formula, which includes a new pricing structure, monthly promotions, and changes in merchandise mix.
Kramer said the company is planning to cut costs by $900 million over the first two years and bring down expenses below 30 percent of sales in that period of its transformation.
Kramer expects the company to achieve an expense run rate of 27 percent by the end of the transformation in 2015. Savings will come mainly via stores, advertising and the operations in its home office.
The company will make investments to enhance store experience, expecting to use cash from operations, with fiscal 2012 capital expense targeted at $800 million. Most of the capital will be utilized on improving J. C. Penney's store experience and installing new in-store shops.
"The department store is the number one opportunity in retail today. We are going to rethink every aspect of our business, boldly pursue change, and create long-term shareholder value, as we become America's favorite store," CEO Ron Johnson said.
Johnson said store experience will be enhanced by including Main Street -the entire store merchandised in a series of 80 to 100 brand shops, which will feature new brands and redoing existing brands. J. C. Penney expects to feature 30 new and transformed brands by fall 2012.
J. C. Penney will also sport a new logo, and a new brand partner in Ellen DeGeneres, a J. C. Penney associate turned television personality.
The company will begin the transformation of the J. C. Penney shopping experience on February 1 this year with the implementation of its new logo, pricing plan and monthly cadence. In August, it will begin a strategy to update all stores with new merchandise and presentation.
JCP is trading on the NYSE at $39.43, up $5.15 or 15.02%, on a volume of 35 million shares.
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by RTT Staff Writer
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