Thursday, May 17, 2007

J.C. Penney Net Rises 13% on Lingerie, Liz Claiborne (Bloomberg)

By Lauren Coleman-Lochner

May 17 (Bloomberg) -- J.C. Penney Co., the third-largest U.S. department-store chain, said first-quarter profit climbed 13 percent and raised its annual earnings forecast on sales of exclusive clothing by Liz Claiborne and its new lingerie line.

Net income increased to $238 million, or $1.04 a share, from $210 million, or 89 cents, a year earlier. Sales rose 3.1 percent to $4.35 billion, the company said today in a statement.

Shoppers bought designer labels at discount prices, such as a Liz & Co. campshirt that J.C. Penney sells for $30, less than half what a similar shirt costs on Liz Claiborne's Web site. The chain is trying to upgrade its image with exclusive lines, such as Ambrielle underwear meant to lure customers from Limited Brands Inc.'s Victoria's Secret.

``Their initiatives seem to be working,'' Steven Baumgarten, an analyst at PNC Wealth Management in Philadelphia, said yesterday. The firm manages $54 billion, including J.C. Penney shares.

J.C. Penney, based in Plano, Texas, raised its full-year earnings forecast by 5 cents to $5.49 a share, matching analysts' estimates. Second-quarter profit will be 77 cents a share, it said.

Shares of the company, which operates 1,039 stores, rose $2.84, or 3.8 percent, to $78.56 at 9:44 a.m. in New York Stock Exchange composite trading. The shares have gained 25 percent over the past 12 months, compared with a 27 percent increase at rival Kohl's Corp., which reports earnings later today.

Exclusive Items

Sales at stores open at least a year, considered an important gauge of retail performance because it measures only established locations, rose 2.2 percent. First-quarter earnings exceeded the $1.03-a-share average estimate of 14 analysts surveyed by Bloomberg.

During the quarter, the company added Ambrielle bras and panties and exclusive men's and women's clothing by Liz Claiborne. It also said it will sell American Living apparel and home goods by Polo Ralph Lauren Corp. starting next year.

The chain is working to get fashions from designers to stores faster to keep up with trends, and is also opening more locations outside of malls and closer Kohl's locations.

J.C. Penney has taken customers from Federated Department Stores Inc.'s Macy's by offering trendy goods such as a new sportswear and denim collection by California designers Chip & Pepper, said Eric Beder, an analyst at Brean Murray Carret & Co. in New York.

Chip & Pepper's jeans, scheduled to debut in stores for back-to-school season, will sell for as little as $35, compared with more than $100 at specialty stores.

Designer Names

Both J.C. Penney and Kohl's have capitalized on a hunger for well-known names, said Patricia Edwards, a Seattle-based money manager at Wentworth, Hauser & Violich.

``We can get a watered-down Chaps for a price that is astoundingly low,'' said Edwards, whose firm manages $9.6 billion in assets. ``Why buy the generic brand?''

Private brands, such as a.n.a., outperformed the rest of the store in the first quarter, President Ken Hicks said during the company's earnings call today.

J.C. Penney plans to open 250 stores in the next five years, most of them outside of malls, where it will more directly compete with Kohl's. Sears Holdings Corp. is the biggest U.S. department-store chain. Federated Department Stores Inc., the operator of Macy's and Bloomingdale's, is No. 2.

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