Penney CEO cautiously optimistic on better holiday

NEW YORK, April 30 Wed Apr 30, 2008 9:30am EDT

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NEW YORK, April 30 (Reuters) - J.C. Penney Co Inc's (JCP.N) chief executive, Myron "Mike" Ullman, has a more cautious view of the fall season than he did six months ago, but he is "cautiously optimistic" the department store operator will have a better holiday season this year.

"We're cautiously optimistic that we'll improve on last year's holiday business," he said on Wednesday, speaking at a Lehman Bros retail conference that was broadcast over the Internet.

Penney's sales and profits have been battered in recent months as its middle-income shoppers, worried about rising food and fuel prices, declining home values and a credit crunch, have pulled back on discretionary spending.

Penney's profit for its fourth quarter, which ended Feb. 2 and included the all-important holiday shopping season, fell almost 10 percent to $430 million.

Profits were hurt after poor third-quarter sales left it with excess merchandise that it had to mark down during the final months of the year, hurting its margins during the holiday quarter.

In reaction to the persistently difficult climate, Penney has slowed its new store opening and remodeling plans for the year, and cut back on inventory to try to avoid costly markdowns during the holiday season again this year.

Ullman also said he is concerned that rising fuel costs have sapped some of the spending power that could have come from the tax rebates that are now reaching U.S. consumers.

While he said the rebates perfectly target Penney's typical shopper, the retailer "has not put anything in its plan" to account for higher spending because its customers are also feeling the squeeze of the current economic climate. (Reporting by Nicole Maestri, editing by Dave Zimmerman)

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