J.C. Penney Sees Steep Drop in Catalog Sales

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J.C. Penney Co. Inc.'s second-quarter results included a 23.3 percent decrease in catalog sales, primarily resulting from the planned delay in the activation of the fall/winter big book as well as weak demand, the company said yesterday.

The delay shifted activation of the book from early June in prior years toward the end of the month this year, said company spokeswoman Stephanie Brown.

"The rationale was to get it out closer to the selling season," she said.

The department stores and catalog sector produced second-quarter operating profit of $11 million, compared with $74 million last year. The plummeting profits were attributed primarily to weakness in catalog operations and lower department store gross margin ratios. Gross margin declined 90 basis points as a percentage of sales. Gross margin reflects the impact of a more aggressive planned promotional and clearance program that was effective in driving unit volumes and comparable store sales gains, the company said.

Overall, the company reported that, before the effects of non-comparable items, it suffered a loss from continuing operations of 20 cents per share in the second quarter, compared with a loss of 15 cents per share in the year-ago period.

Chairman/CEO Allen Questrom said in a statement that "results for the quarter met expectations and provide some encouraging signs that we are starting to make progress towards the rebuilding of our businesses. Catalog performance declined, as expected. Our new catalog management team is developing the business strategies that are expected to improve operating performance."

Vanessa Castagna, president/chief operating officer of stores, catalog and Internet, said during yesterday's conference call that because of longer lead times, improvements are not expected until 2002.

"We expect improved third-quarter results for department stores and catalog ... compared to their weak performances in last year's quarter," Questrom said. "Accordingly, we expect earnings for the third quarter to be in the $0.10 to $0.15 per share range, and continue to expect earnings of $0.30 to $0.35 per share for the year."

Chief financial officer Bob Cavanaugh discussed department stores and catalogs during yesterday's conference call.

"The decline [in profits] was related to catalogs, which had a loss this year compared with a profit last year," said Cavanaugh, who also stated that during the third quarter, "in catalogs, we expect sales to decline in the low teens."


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