For the first fiscal quarter, the retailer reported improvements almost across the board. Revenues were up 8.7% to $4 billion. Comps were up 9.5% at ye olde bricks-and-mortar shops, and up 6.5% for the catalog and Internet segment. Gross margin as a percentage of sales increased nearly 1%, while the ratio of SG&A to sales expenses dropped 2.6%. That strong cost cutting yielded earnings from continuing operations of $0.38, beating the Street's estimates and clobbering last year's lowly nickel per stub.
Well, that's not the whole story. Penney watchers will remember that the firm finally unloaded its drugstore chain, Eckerd, earlier this year. Considerable charges for exiting the pharmacy game pared the final GAAP earnings number to $0.13 per share. Penney also sports one of the healthiest-looking balance sheets in the department-store biz, with $3 billion in cash to offset the $5 billion in debt.
This outfit is definitely outrunning most of its rivals. Executives and underperforming retailers, ever eager to find excuses that don't involve a peek in the mirror, will blame their woes on consumers; retail investors shouldn't buy that beef. Penney, along with peers like Federated Department Stores
Penney's stock has already provided a double over the last year. But with its current better-than-average performance, shares still look like a decent deal, priced around 16 times forward estimates.