J.C. Penney Company Inc. (JCP) surpassed market expectations on revenue and earnings for the fourth quarter of 2018, sending the stock soaring by 22.5% in premarket hours on Thursday.
Total revenues fell 8.4% year-over-year to $3.79 billion, but still came ahead of consensus estimates. On a shifted basis, comparing the 13 weeks ended February 2, 2019 and February 3, 2018, comparable sales fell 4%. On an unshifted basis, comp sales dropped 6%.
GAAP net income decreased to $75 million, or $0.24 per share, from $242 million, or $0.77 per share, in the year-ago quarter. Adjusted net income dropped to $57 million, or $0.18 per share, from $160 million, or $0.51 per share, last year, but topped market expectations.
J.C. Penney’s top performing segments were jewelry and apparel during the quarter. The company recently changed its strategy and decided to stop selling appliances and focus more on apparel and home furnishing, which provide higher margins. The retailer also shifted its furniture sales to its online channel along with a few select stores.
J.C. Penney has decided to close 18 full-line stores in 2019, including the three locations announced in January. The company will also close 9 ancillary home and furniture stores. J.C. Penney anticipates a pretax charge of approx. $15 million associated with these closures during the first half of 2019. Nearly all impacted stores are expected to close in the second quarter of 2019. The company expects free cash flow to be positive for fiscal year 2019.
Last week, J.C. Penney’s rival Walmart (WMT) beat earnings estimates for its fourth quarter 2019.