Buybacks Help J.C. Penney

At 94 cents a share, its profit is ahead of estimates.
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J.C. Penney's

(JCP) - Get Report

third-quarter earnings rose 57% from a year ago, helped by higher sales, a lower interest expense and the absence of a charge that weighed down last year's results.

The department store chain earned $234 million, or 94 cents a share, in the quarter, compared with $149 million, or 50 cents a share, last year. Analysts were forecasting earnings of 92 cents a share in the most recent quarter.

Third-quarter sales rose 2% from a year ago to $4.48 billion, about $50 million shy of the Thomson First Call consensus. The top line reflected a 2.5% jump in comparable department store sales and a 0.9% decline in catalog and Internet sales.

J.C. Penney's earnings benefited from a 39% decline in net interest expense, year over year, to $41 million. The 2004 quarter also included an expense of $47 million related to a bond redemption. Average diluted shares outstanding were 248.6 million in the latest quarter, down from 309 million, thanks to stock buybacks.

Gross margin rose by 110 basis points to 41.8%, reflecting "improvements in inventory management, seasonal transition and overall flow of merchandise, as well as continued strength in the performance of the company's private brand merchandise," the company said.

"As we enter the fourth quarter, we are well positioned for the holiday selling season. While there are issues impacting the consumer, we know we have a strong and exciting selection of national and private brand merchandise that is supported by compelling and creative marketing programs," the company said.

For the fourth quarter, J.C. Penney expects to earn $1.58 a share, matching the Thomson First Call average estimate. The company expects comparable department store sales and direct sales to rise in the low single digits in the quarter.

The shares added 20 cents, or 0.4%, to $53.95 on Instinet.