Associated Press
08.17.2004

Department-store operator J.C. Penney Co. eked out a small profit in the second quarter, compared to breaking even in the year-ago period. But it cut its profit forecast in the current program because of a program to retire debt early.

The company said Tuesday that it earned $1 million in the three months ended July 31.

The results included operating losses from the Eckerd drugstore business, which Penney sold during the quarter.

Excluding results from Eckerd, Penney said it earned $72 million, or 23 cents per share, in the second quarter compared to a loss of $3 million, or 3 cents per share, a year earlier.

The results matched the forecast of analysts surveyed by Thomson First Call.

Revenue rose 5.8 percent, to $3.86 billion from $3.65 billion a year earlier and slightly beat analysts' expectations.

Same-store sales, an important measure in retailing, rose 7.1 percent at the department stores, Penney said. Same-store sales are considered the best indicator of a retailer's health.

Chairman and chief executive Allen Questrom said higher oil prices and fear of terrorism could dampen consumer spending, "but we remain confident that our third-quarter sales and operating profits will improve."

The Plano-based company, however, reduced its estimate of third-quarter earnings to between 35 cents and 40 cents per share, citing charges of 11 cents per share due to early retirement of debt. The company announced earlier this month it would use $3.5 billion in proceeds from selling Eckerd and $1.1 billion in cash to pay off debt early and buy back shares of its stock.

Analysts surveyed by Thomson First Call expected 37 cents per share.

Penney said net income in the first six months of the year was $42 million, or 14 cents per share, compared to $61 million, or 18 cents per share, in 2003. Sales rose to $7.89 billion from $7.36 billion.

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