J.C. Penney said fourth-quarter earnings fell 13% on a higher tax expense, and issued profit guidance for the first quarter below analysts' expectations.
Investors were disappointed with the weak first-quarter outlook, as shares fell as much as 4% earlier. But Mike Ullman, J.C. Penney's chairman and chief executive, told CNBC he's confident the retailer will make up for any first-quarter weakness during the rest of the year.
"We are very confident about the total year," Ullman told CNBC. "The first quarter is not the strongest quarter in terms of the comparison."
Net income, which includes discontinued operations, fell to $477 million, or $2.09 a share for the fourth quarter ended Feb. 3, from $551 million, or $2.34 a share, a year earlier.
Earnings from continuing operations rose to $457 million, or $2 a share, for the fourth quarter, compared with $450 million, or $1.92 a share, a year earlier. Earnings were ahead of J.C. Penney's previous guidance for a profit of $1.94 a share and the $1.97 a share analysts surveyed by Thomson Financial predicted. The latest quarter included an extra week.
Sales gained 7% to nearly $6.6 billion for the quarter, in line with forecasts. J.C. Penney said total department store sales rose 4% on a 13-week basis, while sales at stores open at least a year rose 2.2%, helped by children's apparel, fine jewelry and family shoes.
The company said its income tax expense grew 51% to $271 million in the quarter from $179 million in the prior year.
The chain said gross margin improved 180 basis points to 38% of sales, reflecting benefits from strong private brand performance and better inventory management.
For the fiscal year, earnings grew 6% to $1.15 billion, or $4.96 a share, from $1.09 billion, or $4.26 a share, during the same period last year. Revenue rose 6% to $19.9 billion from $18.8 billion last year.
J.C. Penney, which has been working to convince shoppers that it has shed its dowdy image and become a stylish retailer stocked with fashionable merchandise, predicted a fiscal first-quarter profit 99 cents a share, below analysts' forecasts of $1.05 a share.
The retailer said it expects a full-year profit of $5.44 a share, while analysts anticipated a profit of $5.42 a share.
Fiscal first-quarter same-store sales are expected to rise in the mid-single digits, the company said.