☒
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
|
26-0037077
|
||
(State or other jurisdiction of incorporation or organization)
|
|
(I.R.S. Employer Identification No.)
|
||
|
|
|
|
|
6501 Legacy Drive
|
Plano
|
Texas
|
|
75024 - 3698
|
(Address of principal executive offices)
|
|
(Zip Code)
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common Stock of 50 cents par value
|
JCP
|
New York Stock Exchange
|
Preferred Stock Purchase Rights
|
JCP
|
New York Stock Exchange
|
Large accelerated filer
|
☒
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☐
|
Smaller reporting company
|
☐
|
|
|
Emerging growth company
|
☐
|
|
|
|
|
|
Page
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
(In millions, except per share data)
|
August 3,
2019 |
|
August 4,
2018 |
|
August 3,
2019 |
|
August 4,
2018 |
||||||||
Total net sales
|
$
|
2,509
|
|
|
$
|
2,762
|
|
|
$
|
4,948
|
|
|
$
|
5,346
|
|
Credit income and other
|
110
|
|
|
67
|
|
|
226
|
|
|
154
|
|
||||
Total revenues
|
2,619
|
|
|
2,829
|
|
|
5,174
|
|
|
5,500
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Costs and expenses/(income):
|
|
|
|
|
|
|
|
||||||||
Cost of goods sold (exclusive of depreciation and amortization shown separately below)
|
1,585
|
|
|
1,831
|
|
|
3,215
|
|
|
3,543
|
|
||||
Selling, general and administrative (SG&A)
|
870
|
|
|
880
|
|
|
1,726
|
|
|
1,706
|
|
||||
Depreciation and amortization
|
137
|
|
|
140
|
|
|
284
|
|
|
281
|
|
||||
Real estate and other, net
|
3
|
|
|
12
|
|
|
(2
|
)
|
|
(6
|
)
|
||||
Restructuring and management transition
|
7
|
|
|
2
|
|
|
27
|
|
|
9
|
|
||||
Total costs and expenses
|
2,602
|
|
|
2,865
|
|
|
5,250
|
|
|
5,533
|
|
||||
Operating income/(loss)
|
17
|
|
|
(36
|
)
|
|
(76
|
)
|
|
(33
|
)
|
||||
Other components of net periodic pension cost/(income)
|
(13
|
)
|
|
(19
|
)
|
|
(26
|
)
|
|
(38
|
)
|
||||
(Gain)/loss on extinguishment of debt
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
23
|
|
||||
Net interest expense
|
74
|
|
|
79
|
|
|
147
|
|
|
157
|
|
||||
Income/(loss) before income taxes
|
(43
|
)
|
|
(96
|
)
|
|
(196
|
)
|
|
(175
|
)
|
||||
Income tax expense/(benefit)
|
5
|
|
|
5
|
|
|
6
|
|
|
4
|
|
||||
Net income/(loss)
|
$
|
(48
|
)
|
|
$
|
(101
|
)
|
|
$
|
(202
|
)
|
|
$
|
(179
|
)
|
Earnings/(loss) per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.15
|
)
|
|
$
|
(0.32
|
)
|
|
$
|
(0.63
|
)
|
|
$
|
(0.57
|
)
|
Diluted
|
$
|
(0.15
|
)
|
|
$
|
(0.32
|
)
|
|
$
|
(0.63
|
)
|
|
$
|
(0.57
|
)
|
Weighted average shares – basic
|
319.4
|
|
|
315.7
|
|
|
318.6
|
|
|
314.8
|
|
||||
Weighted average shares – diluted
|
319.4
|
|
|
315.7
|
|
|
318.6
|
|
|
314.8
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
($ in millions)
|
August 3,
2019 |
|
August 4,
2018 |
|
August 3,
2019 |
|
August 4,
2018 |
||||||||
Net income/(loss)
|
$
|
(48
|
)
|
|
$
|
(101
|
)
|
|
$
|
(202
|
)
|
|
$
|
(179
|
)
|
Other comprehensive income/(loss), net of tax:
|
|
|
|
|
|
|
|
||||||||
Retirement benefit plans
|
|
|
|
|
|
|
|
||||||||
Reclassification for amortization of prior service (credit)/cost (1)
|
2
|
|
|
1
|
|
|
4
|
|
|
2
|
|
||||
Cash flow hedges
|
|
|
|
|
|
|
|
||||||||
Gain/(loss) on interest rate swaps (2)
|
(28
|
)
|
|
—
|
|
|
(39
|
)
|
|
5
|
|
||||
Reclassification for periodic settlements (3)
|
(2
|
)
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
||||
Total other comprehensive income/(loss), net of tax
|
(28
|
)
|
|
1
|
|
|
(39
|
)
|
|
7
|
|
||||
Total comprehensive income/(loss), net of tax
|
$
|
(76
|
)
|
|
$
|
(100
|
)
|
|
$
|
(241
|
)
|
|
$
|
(172
|
)
|
(1)
|
Net of $0 million of tax in each of the three and six months ended August 3, 2019 and net of $(1) million and $(2) million of tax in the three and six months ended August 4, 2018, respectively. Pre-tax amounts of $2 million and $4 million in each of the three and six months ended August 3, 2019 and August 4, 2018, respectively, were recognized in Other components of net periodic pension cost/(income) in the unaudited Interim Consolidated Statements of Operations.
|
(2)
|
Net of $0 million of tax in each of the three and six months ended August 3, 2019 and net of $(1) million of tax in the six months ended August 4, 2018.
|
(3)
|
Net of $0 million of tax in each of the three and six months ended August 3, 2019. Pre-tax amounts of $(2) million and $(4) million for the three and six months ended August 3, 2019, respectively, were recognized in Net interest expense in the unaudited Interim Consolidated Statements of Operations.
|
|
August 3,
2019 |
|
August 4,
2018 |
|
February 2,
2019 |
||||||
(In millions, except per share data)
|
(Unaudited)
|
|
(Unaudited)
|
|
|
||||||
Assets
|
|
|
|
|
|
||||||
Current assets:
|
|
|
|
|
|
||||||
Cash in banks and in transit
|
$
|
163
|
|
|
$
|
171
|
|
|
$
|
109
|
|
Cash short-term investments
|
12
|
|
|
11
|
|
|
224
|
|
|||
Cash and cash equivalents
|
175
|
|
|
182
|
|
|
333
|
|
|||
Merchandise inventory
|
2,471
|
|
|
2,824
|
|
|
2,437
|
|
|||
Prepaid expenses and other
|
275
|
|
|
221
|
|
|
189
|
|
|||
Total current assets
|
2,921
|
|
|
3,227
|
|
|
2,959
|
|
|||
Property and equipment (net of accumulated depreciation of $3,167, $3,293 and $3,425)
|
3,591
|
|
|
4,058
|
|
|
3,938
|
|
|||
Operating lease assets
|
925
|
|
|
—
|
|
|
—
|
|
|||
Prepaid pension
|
166
|
|
|
87
|
|
|
147
|
|
|||
Other assets
|
657
|
|
|
686
|
|
|
677
|
|
|||
Total Assets
|
$
|
8,260
|
|
|
$
|
8,058
|
|
|
$
|
7,721
|
|
Liabilities and Stockholders’ Equity
|
|
|
|
|
|
||||||
Current liabilities:
|
|
|
|
|
|
||||||
Merchandise accounts payable
|
$
|
878
|
|
|
$
|
910
|
|
|
$
|
847
|
|
Other accounts payable and accrued expenses
|
970
|
|
|
1,025
|
|
|
995
|
|
|||
Current operating lease liabilities
|
82
|
|
|
—
|
|
|
—
|
|
|||
Current portion of finance leases and note payable
|
2
|
|
|
7
|
|
|
8
|
|
|||
Current maturities of long-term debt
|
197
|
|
|
42
|
|
|
92
|
|
|||
Total current liabilities
|
2,129
|
|
|
1,984
|
|
|
1,942
|
|
|||
Noncurrent operating lease liabilities
|
1,089
|
|
|
—
|
|
|
—
|
|
|||
Long-term finance leases and note payable
|
1
|
|
|
208
|
|
|
204
|
|
|||
Long-term debt
|
3,589
|
|
|
3,960
|
|
|
3,716
|
|
|||
Deferred taxes
|
121
|
|
|
144
|
|
|
131
|
|
|||
Other liabilities
|
368
|
|
|
546
|
|
|
558
|
|
|||
Total Liabilities
|
7,297
|
|
|
6,842
|
|
|
6,551
|
|
|||
Stockholders’ Equity
|
|
|
|
|
|
||||||
Common stock(1)
|
159
|
|
|
157
|
|
|
158
|
|
|||
Additional paid-in capital
|
4,719
|
|
|
4,709
|
|
|
4,713
|
|
|||
Reinvested earnings/(accumulated deficit)
|
(3,601
|
)
|
|
(3,297
|
)
|
|
(3,373
|
)
|
|||
Accumulated other comprehensive income/(loss)
|
(314
|
)
|
|
(353
|
)
|
|
(328
|
)
|
|||
Total Stockholders’ Equity
|
963
|
|
|
1,216
|
|
|
1,170
|
|
|||
Total Liabilities and Stockholders’ Equity
|
$
|
8,260
|
|
|
$
|
8,058
|
|
|
$
|
7,721
|
|
(1)
|
1.25 billion shares of common stock are authorized with a par value of $0.50 per share. The total shares issued and outstanding were 317.7 million, 314.8 million and 316.1 million as of August 3, 2019, August 4, 2018 and February 2, 2019, respectively.
|
(In millions)
|
Number of Common Shares
|
|
Common Stock
|
|
Additional Paid-in Capital
|
|
Reinvested Earnings/(Accumulated Deficit)
|
|
Accumulated Other Comprehensive Income/(Loss)
|
|
Total Stockholders' Equity
|
|||||||||||
February 2, 2019
|
316.1
|
|
|
$
|
158
|
|
|
$
|
4,713
|
|
|
$
|
(3,373
|
)
|
|
$
|
(328
|
)
|
|
$
|
1,170
|
|
ASC 842 (Leases) and ASU 2018-02 (Stranded Taxes) adoption (See Note 2)
|
—
|
|
|
—
|
|
|
—
|
|
|
(26
|
)
|
|
53
|
|
|
27
|
|
|||||
Net income/(loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
(154
|
)
|
|
—
|
|
|
(154
|
)
|
|||||
Other comprehensive income/(loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11
|
)
|
|
(11
|
)
|
|||||
Stock-based compensation and other
|
0.7
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|||||
May 4, 2019
|
316.8
|
|
|
$
|
158
|
|
|
$
|
4,715
|
|
|
$
|
(3,553
|
)
|
|
$
|
(286
|
)
|
|
$
|
1,034
|
|
Net income/(loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
(48
|
)
|
|
—
|
|
|
(48
|
)
|
|||||
Other comprehensive income/(loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(28
|
)
|
|
(28
|
)
|
|||||
Stock-based compensation and other
|
0.9
|
|
|
1
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|||||
August 3, 2019
|
317.7
|
|
|
$
|
159
|
|
|
$
|
4,719
|
|
|
$
|
(3,601
|
)
|
|
$
|
(314
|
)
|
|
$
|
963
|
|
(In millions)
|
Number of Common Shares
|
|
Common Stock
|
|
Additional Paid-in Capital
|
|
Reinvested Earnings/(Accumulated Deficit)
|
|
Accumulated Other Comprehensive Income/(Loss)
|
|
Total Stockholders' Equity
|
|||||||||||
February 3, 2018
|
312.0
|
|
|
$
|
156
|
|
|
$
|
4,705
|
|
|
$
|
(3,118
|
)
|
|
$
|
(360
|
)
|
|
$
|
1,383
|
|
Net income/(loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
(78
|
)
|
|
—
|
|
|
(78
|
)
|
|||||
Other comprehensive income/(loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|
6
|
|
|||||
Stock-based compensation and other
|
2.3
|
|
|
1
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|||||
May 5, 2018
|
314.3
|
|
|
$
|
157
|
|
|
$
|
4,708
|
|
|
$
|
(3,196
|
)
|
|
$
|
(354
|
)
|
|
$
|
1,315
|
|
Net income/(loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
(101
|
)
|
|
—
|
|
|
(101
|
)
|
|||||
Other comprehensive income/(loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|||||
Stock-based compensation and other
|
0.5
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|||||
August 4, 2018
|
314.8
|
|
|
$
|
157
|
|
|
$
|
4,709
|
|
|
$
|
(3,297
|
)
|
|
$
|
(353
|
)
|
|
$
|
1,216
|
|
|
Six Months Ended
|
||||||
($ in millions)
|
August 3,
2019 |
|
August 4,
2018 |
||||
Cash flows from operating activities
|
|
|
|
||||
Net income/(loss)
|
$
|
(202
|
)
|
|
$
|
(179
|
)
|
Adjustments to reconcile net income/(loss) to net cash provided by/(used in) operating activities:
|
|
|
|
||||
Restructuring and management transition
|
17
|
|
|
(3
|
)
|
||
Asset impairments and other charges
|
—
|
|
|
52
|
|
||
Net (gain)/loss on sale of non-operating assets
|
(1
|
)
|
|
—
|
|
||
Net (gain)/loss on sale of operating assets
|
3
|
|
|
(57
|
)
|
||
(Gain)/loss on extinguishment of debt
|
(1
|
)
|
|
23
|
|
||
Depreciation and amortization
|
284
|
|
|
281
|
|
||
Benefit plans
|
(29
|
)
|
|
(37
|
)
|
||
Stock-based compensation
|
6
|
|
|
6
|
|
||
Deferred taxes
|
—
|
|
|
(1
|
)
|
||
Change in cash from:
|
|
|
|
||||
Inventory
|
(34
|
)
|
|
(21
|
)
|
||
Prepaid expenses and other
|
(82
|
)
|
|
(21
|
)
|
||
Merchandise accounts payable
|
31
|
|
|
(63
|
)
|
||
Accrued expenses and other
|
9
|
|
|
(115
|
)
|
||
Net cash provided by/(used in) operating activities
|
1
|
|
|
(135
|
)
|
||
Cash flows from investing activities
|
|
|
|
||||
Capital expenditures
|
(146
|
)
|
|
(221
|
)
|
||
Net proceeds from sale of non-operating assets
|
1
|
|
|
—
|
|
||
Net proceeds from sale of operating assets
|
12
|
|
|
121
|
|
||
Net cash provided by/(used in) investing activities
|
(133
|
)
|
|
(100
|
)
|
||
Cash flows from financing activities
|
|
|
|
||||
Proceeds from issuance of long-term debt
|
—
|
|
|
400
|
|
||
Proceeds from borrowings under the credit facility
|
946
|
|
|
2,258
|
|
||
Payments of borrowings under the credit facility
|
(946
|
)
|
|
(2,081
|
)
|
||
Premium on early retirement of debt
|
—
|
|
|
(20
|
)
|
||
Payments of finance leases and note payable
|
(1
|
)
|
|
(4
|
)
|
||
Payments of long-term debt
|
(26
|
)
|
|
(586
|
)
|
||
Financing costs
|
—
|
|
|
(7
|
)
|
||
Proceeds from stock issued under stock plans
|
1
|
|
|
2
|
|
||
Tax withholding payments for vested restricted stock
|
—
|
|
|
(3
|
)
|
||
Net cash provided by/(used in) financing activities
|
(26
|
)
|
|
(41
|
)
|
||
Net increase/(decrease) in cash and cash equivalents
|
(158
|
)
|
|
(276
|
)
|
||
Cash and cash equivalents at beginning of period
|
333
|
|
|
458
|
|
||
Cash and cash equivalents at end of period
|
$
|
175
|
|
|
$
|
182
|
|
|
|
|
|
||||
Supplemental cash flow information
|
|
|
|
||||
Income taxes received/(paid), net
|
$
|
(6
|
)
|
|
$
|
(5
|
)
|
Interest received/(paid), net
|
(139
|
)
|
|
(145
|
)
|
||
Supplemental non-cash investing and financing activity
|
|
|
|
||||
Increase/(decrease) in other accounts payable related to purchases of property and equipment and software
|
(15
|
)
|
|
(20
|
)
|
||
Remeasurement of leased assets and lease obligations
|
52
|
|
|
—
|
|
|
Balance as of February 3, 2019
|
||||||||||
($ in millions)
|
Balances removed under prior accounting
|
|
Balances added/reclassified under new lease standard
|
|
Net impact of new lease standard
|
||||||
Prepaid expenses and other
|
$
|
—
|
|
|
$
|
(5
|
)
|
|
$
|
(5
|
)
|
Property and equipment
|
153
|
|
|
—
|
|
|
(153
|
)
|
|||
Operating lease assets
|
—
|
|
|
910
|
|
|
910
|
|
|||
Other assets
|
—
|
|
|
(7
|
)
|
|
(7
|
)
|
|||
Total assets
|
$
|
153
|
|
|
$
|
898
|
|
|
$
|
745
|
|
|
|
|
|
|
|
||||||
Other accounts payable and accrued expenses
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
(4
|
)
|
Current operating lease liabilities
|
—
|
|
|
85
|
|
|
85
|
|
|||
Current portion of finance leases and note payable
|
5
|
|
|
—
|
|
|
(5
|
)
|
|||
Noncurrent operating lease liabilities
|
—
|
|
|
1,074
|
|
|
1,074
|
|
|||
Long-term finance leases and note payable
|
203
|
|
|
—
|
|
|
(203
|
)
|
|||
Deferred taxes
|
10
|
|
|
—
|
|
|
(10
|
)
|
|||
Other liabilities
|
11
|
|
|
(208
|
)
|
|
(219
|
)
|
|||
Reinvested earnings/(accumulated deficit)
|
80
|
|
|
(53
|
)
|
|
27
|
|
|||
Total liabilities and stockholders’ equity
|
$
|
153
|
|
|
$
|
898
|
|
|
$
|
745
|
|
($ in millions)
|
|
Classification
|
|
August 3, 2019
|
||
Assets
|
|
|
|
|
||
Operating lease assets
|
|
Operating lease assets
|
|
$
|
925
|
|
Finance lease assets
|
|
Property and equipment
|
|
1
|
|
|
Total leased assets
|
|
|
|
$
|
926
|
|
Liabilities
|
|
|
|
|
||
Current
|
|
|
|
|
||
Operating
|
|
Current operating lease liabilities
|
|
$
|
82
|
|
Finance
|
|
Current portion of finance leases and note payable
|
|
1
|
|
|
Noncurrent
|
|
|
|
|
||
Operating
|
|
Noncurrent operating lease liabilities
|
|
1,089
|
|
|
Finance
|
|
Long-term finance leases and note payable
|
|
1
|
|
|
Total leased liabilities
|
|
|
|
$
|
1,173
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||
($ in millions)
|
|
Classification
|
|
August 3, 2019
|
|
August 3, 2019
|
||||
Operating lease cost
|
|
Selling, general and administrative expense (SG&A)
|
|
$
|
50
|
|
|
$
|
98
|
|
Variable lease cost
|
|
Selling, general and administrative expense (SG&A)
|
|
32
|
|
|
64
|
|
||
Finance lease cost
|
|
|
|
|
|
|
||||
Amortization of leased assets
|
|
Depreciation and amortization
|
|
—
|
|
|
—
|
|
||
Interest on lease liabilities
|
|
Net interest expense
|
|
—
|
|
|
—
|
|
||
Rental income
|
|
Real estate and other, net
|
|
3
|
|
|
5
|
|
||
Net lease cost
|
|
|
|
$
|
79
|
|
|
$
|
157
|
|
($ in millions)
|
Operating Leases
|
|
Finance Leases
|
|
Total
|
||||||
2019
|
$
|
104
|
|
|
$
|
—
|
|
|
$
|
104
|
|
2020
|
196
|
|
|
1
|
|
|
197
|
|
|||
2021
|
190
|
|
|
—
|
|
|
190
|
|
|||
2022
|
179
|
|
|
—
|
|
|
179
|
|
|||
2023
|
173
|
|
|
—
|
|
|
173
|
|
|||
Thereafter
|
1,844
|
|
|
2
|
|
|
1,846
|
|
|||
Total lease payments
|
2,686
|
|
|
3
|
|
|
2,689
|
|
|||
Less: amounts representing interest
|
(1,515
|
)
|
|
(1
|
)
|
|
(1,516
|
)
|
|||
Present value of lease liabilities
|
$
|
1,171
|
|
|
$
|
2
|
|
|
$
|
1,173
|
|
|
August 3, 2019
|
|
Weighted-average remaining lease term (years)
|
|
|
Operating leases
|
16
|
|
Financing leases
|
8
|
|
Weighted-average discount rate
|
|
|
Operating leases
|
11
|
%
|
Financing leases
|
6
|
%
|
|
Six Months Ended
|
|
($ in millions)
|
August 3, 2019
|
|
Cash paid for amounts included in the measurement of these liabilities
|
|
|
Operating cash flows from operating leases
|
102
|
|
Operating cash flows from finance leases
|
1
|
|
Financing cash flows from finance leases
|
1
|
|
($ in millions)
|
|
||
2019
|
$
|
190
|
|
2020
|
178
|
|
|
2021
|
163
|
|
|
2022
|
148
|
|
|
2023
|
135
|
|
|
Thereafter
|
1,626
|
|
|
Less: sublease income
|
(43
|
)
|
|
Total minimum lease payments
|
$
|
2,397
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||||||||||||||
($ in millions)
|
August 3, 2019
|
|
August 4, 2018
|
|
August 3, 2019
|
|
August 4, 2018
|
||||||||||||||||||||
Women’s apparel
|
$
|
664
|
|
|
26
|
%
|
|
$
|
695
|
|
|
25
|
%
|
|
$
|
1,254
|
|
|
25
|
%
|
|
$
|
1,309
|
|
|
25
|
%
|
Men’s apparel and accessories
|
537
|
|
|
21
|
%
|
|
563
|
|
|
20
|
%
|
|
1,015
|
|
|
21
|
%
|
|
1,063
|
|
|
20
|
%
|
||||
Women’s accessories, including Sephora
|
341
|
|
|
14
|
%
|
|
371
|
|
|
13
|
%
|
|
690
|
|
|
14
|
%
|
|
749
|
|
|
14
|
%
|
||||
Home
|
246
|
|
|
10
|
%
|
|
361
|
|
|
13
|
%
|
|
551
|
|
|
11
|
%
|
|
715
|
|
|
13
|
%
|
||||
Children’s, including toys
|
216
|
|
|
9
|
%
|
|
241
|
|
|
9
|
%
|
|
416
|
|
|
8
|
%
|
|
448
|
|
|
8
|
%
|
||||
Footwear
|
194
|
|
|
8
|
%
|
|
202
|
|
|
7
|
%
|
|
375
|
|
|
8
|
%
|
|
391
|
|
|
7
|
%
|
||||
Jewelry
|
155
|
|
|
6
|
%
|
|
151
|
|
|
6
|
%
|
|
322
|
|
|
6
|
%
|
|
313
|
|
|
6
|
%
|
||||
Services and other
|
156
|
|
|
6
|
%
|
|
178
|
|
|
7
|
%
|
|
325
|
|
|
7
|
%
|
|
358
|
|
|
7
|
%
|
||||
Total net sales
|
$
|
2,509
|
|
|
100
|
%
|
|
$
|
2,762
|
|
|
100
|
%
|
|
$
|
4,948
|
|
|
100
|
%
|
|
$
|
5,346
|
|
|
100
|
%
|
(in millions)
|
August 3, 2019
|
|
August 4, 2018
|
|
February 2, 2019
|
||||||
Gift cards
|
$
|
114
|
|
|
$
|
116
|
|
|
$
|
140
|
|
Loyalty rewards
|
63
|
|
|
62
|
|
|
60
|
|
|||
Total contract liability
|
$
|
177
|
|
|
$
|
178
|
|
|
$
|
200
|
|
(in millions)
|
2019
|
|
2018
|
||||
Beginning balance
|
$
|
200
|
|
|
$
|
217
|
|
Current period gift cards sold and loyalty reward points earned
|
182
|
|
|
148
|
|
||
Net sales from amounts included in contract liability opening balances
|
(56
|
)
|
|
(59
|
)
|
||
Net sales from current period usage
|
(149
|
)
|
|
(128
|
)
|
||
Ending balance
|
$
|
177
|
|
|
$
|
178
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
(in millions, except per share data)
|
August 3,
2019 |
|
August 4,
2018 |
|
August 3,
2019 |
|
August 4,
2018 |
||||||||
Earnings/(loss)
|
|
|
|
|
|
|
|
||||||||
Net income/(loss)
|
$
|
(48
|
)
|
|
$
|
(101
|
)
|
|
$
|
(202
|
)
|
|
$
|
(179
|
)
|
Shares
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding (basic shares)
|
319.4
|
|
|
315.7
|
|
|
318.6
|
|
|
314.8
|
|
||||
Adjustment for assumed dilution:
|
|
|
|
|
|
|
|
||||||||
Stock options, restricted stock awards and warrant
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Weighted average shares assuming dilution (diluted shares)
|
319.4
|
|
|
315.7
|
|
|
318.6
|
|
|
314.8
|
|
||||
EPS
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.15
|
)
|
|
$
|
(0.32
|
)
|
|
$
|
(0.63
|
)
|
|
$
|
(0.57
|
)
|
Diluted
|
$
|
(0.15
|
)
|
|
$
|
(0.32
|
)
|
|
$
|
(0.63
|
)
|
|
$
|
(0.57
|
)
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||
(Shares in millions)
|
August 3,
2019 |
|
August 4,
2018 |
|
August 3,
2019 |
|
August 4,
2018 |
||||
Stock options, restricted stock awards and warrant
|
24.7
|
|
|
25.6
|
|
|
23.6
|
|
|
27.2
|
|
($ in millions)
|
|
August 3, 2019
|
|
August 4, 2018
|
|
February 2, 2019
|
||||||
Issue:
|
|
|
|
|
|
|
||||||
8.125% Senior Notes Due 2019
|
|
$
|
50
|
|
|
$
|
50
|
|
|
$
|
50
|
|
5.65% Senior Notes Due 2020 (1)
|
|
105
|
|
|
110
|
|
|
110
|
|
|||
2017 Credit Facility (Matures in 2022)
|
|
—
|
|
|
177
|
|
|
—
|
|
|||
2016 Term Loan Facility (Matures in 2023)
|
|
1,561
|
|
|
1,604
|
|
|
1,583
|
|
|||
5.875% Senior Secured Notes Due 2023 (1)
|
|
500
|
|
|
500
|
|
|
500
|
|
|||
7.125% Debentures Due 2023
|
|
10
|
|
|
10
|
|
|
10
|
|
|||
8.625% Senior Secured Second Priority Notes Due 2025 (1)
|
|
400
|
|
|
400
|
|
|
400
|
|
|||
6.9% Notes Due 2026
|
|
2
|
|
|
2
|
|
|
2
|
|
|||
6.375% Senior Notes Due 2036 (1)
|
|
388
|
|
|
388
|
|
|
388
|
|
|||
7.4% Debentures Due 2037
|
|
313
|
|
|
313
|
|
|
313
|
|
|||
7.625% Notes Due 2097
|
|
500
|
|
|
500
|
|
|
500
|
|
|||
Total debt
|
|
3,829
|
|
|
4,054
|
|
|
3,856
|
|
|||
Unamortized debt issuance costs
|
|
(43
|
)
|
|
(52
|
)
|
|
(48
|
)
|
|||
Less: current maturities
|
|
(197
|
)
|
|
(42
|
)
|
|
(92
|
)
|
|||
Total long-term debt
|
|
$
|
3,589
|
|
|
$
|
3,960
|
|
|
$
|
3,716
|
|
(1)
|
These debt issuances contain a change of control provision that would obligate us, at the holders’ option, to repurchase the debt at a price of 101%.
|
|
Asset Derivatives at Fair Value
|
|
Liability Derivatives at Fair Value
|
||||||||||||||||||||||||
($ in millions)
|
Balance Sheet Location
|
|
August 3, 2019
|
|
August 4, 2018
|
|
February 2, 2019
|
|
Balance Sheet Location
|
|
August 3, 2019
|
|
August 4, 2018
|
|
February 2, 2019
|
||||||||||||
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest rate swaps
|
Prepaid expenses and other
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
Other accounts payable and accrued expenses
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest rate swaps
|
Other assets
|
|
—
|
|
|
16
|
|
|
10
|
|
|
Other liabilities
|
|
48
|
|
|
—
|
|
|
15
|
|
||||||
Total derivatives designated as hedging instruments
|
|
|
$
|
1
|
|
|
$
|
17
|
|
|
$
|
10
|
|
|
|
|
$
|
48
|
|
|
$
|
—
|
|
|
$
|
15
|
|
•
|
Home office and stores — charges for actions to reduce our store and home office expenses including employee termination benefits, store lease termination and impairment charges;
|
•
|
Management transition — charges related to implementing changes within our management leadership team for both incoming and outgoing members of management; and
|
•
|
Other — charges related primarily to contract termination costs and costs related to the closure of certain supply chain locations.
|
|
Three Months Ended
|
|
Six Months Ended
|
|
Cumulative
Amount From Program Inception Through
August 3, 2019
|
||||||||||||||
($ in millions)
|
August 3,
2019 |
|
August 4,
2018 |
|
August 3,
2019 |
|
August 4,
2018 |
|
|||||||||||
Home office and stores
|
$
|
4
|
|
|
$
|
2
|
|
|
$
|
23
|
|
|
$
|
9
|
|
|
$
|
509
|
|
Management transition
|
3
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
268
|
|
|||||
Total
|
$
|
7
|
|
|
$
|
2
|
|
|
$
|
27
|
|
|
$
|
9
|
|
|
$
|
777
|
|
($ in millions)
|
Home Office
and Stores
|
|
Management
Transition
|
|
Other
|
|
Total
|
||||||||
February 2, 2019
|
$
|
16
|
|
|
$
|
—
|
|
|
$
|
2
|
|
|
$
|
18
|
|
ASC 842 (Leases) adoption (See Note 2)
|
(15
|
)
|
|
—
|
|
|
—
|
|
|
(15
|
)
|
||||
Charges
|
4
|
|
|
5
|
|
|
—
|
|
|
9
|
|
||||
Cash payments
|
(3
|
)
|
|
(2
|
)
|
|
(2
|
)
|
|
(7
|
)
|
||||
August 3, 2019
|
$
|
2
|
|
|
$
|
3
|
|
|
$
|
—
|
|
|
$
|
5
|
|
•
|
Level 1 — Quoted prices in active markets for identical assets or liabilities.
|
•
|
Level 2 — Significant observable inputs other than quoted prices in active markets for similar assets and liabilities, such as quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
|
•
|
Level 3 — Significant unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants.
|
|
August 3, 2019
|
|
August 4, 2018
|
|
February 2, 2019
|
||||||||||||||||||
($ in millions)
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
||||||||||||
Total debt, excluding unamortized debt issuance costs, finance leases and note payable
|
$
|
3,829
|
|
|
$
|
2,373
|
|
|
$
|
4,054
|
|
|
$
|
3,385
|
|
|
$
|
3,856
|
|
|
$
|
2,579
|
|
($ in millions)
|
Net Actuarial
Gain/(Loss)
|
|
Prior Service
Credit/(Cost)
|
|
Foreign Currency Translation
|
|
Gain/(Loss) on Cash Flow Hedges
|
|
Accumulated
Other
Comprehensive
Income/(Loss)
|
||||||||||
February 2, 2019
|
$
|
(290
|
)
|
|
$
|
(22
|
)
|
|
$
|
(1
|
)
|
|
$
|
(15
|
)
|
|
$
|
(328
|
)
|
ASU 2018-02 (Stranded Taxes) adoption (See Note 2)
|
46
|
|
|
3
|
|
|
—
|
|
|
4
|
|
|
53
|
|
|||||
Other comprehensive income/(loss) before reclassifications
|
—
|
|
|
—
|
|
|
—
|
|
|
(39
|
)
|
|
(39
|
)
|
|||||
Amounts reclassified from accumulated other comprehensive income
|
—
|
|
|
4
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|||||
August 3, 2019
|
$
|
(244
|
)
|
|
$
|
(15
|
)
|
|
$
|
(1
|
)
|
|
$
|
(54
|
)
|
|
$
|
(314
|
)
|
($ in millions)
|
Net Actuarial
Gain/(Loss) |
|
Prior Service
Credit/(Cost) |
|
Foreign Currency Translation
|
|
Gain/(Loss) on Cash Flow Hedges
|
|
Accumulated
Other Comprehensive Income/(Loss) |
||||||||||
February 3, 2018
|
$
|
(330
|
)
|
|
$
|
(26
|
)
|
|
$
|
—
|
|
|
$
|
(4
|
)
|
|
$
|
(360
|
)
|
Other comprehensive income/(loss) before reclassifications
|
—
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
5
|
|
|||||
Amounts reclassified from accumulated other comprehensive income
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|||||
August 4, 2018
|
$
|
(330
|
)
|
|
$
|
(24
|
)
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
(353
|
)
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
($ in millions)
|
August 3,
2019 |
|
August 4,
2018 |
|
August 3,
2019 |
|
August 4,
2018 |
||||||||
Service cost
|
$
|
7
|
|
|
$
|
10
|
|
|
$
|
14
|
|
|
$
|
19
|
|
|
|
|
|
|
|
|
|
||||||||
Other components of net periodic pension cost/(income):
|
|
|
|
|
|
|
|
||||||||
Interest cost
|
33
|
|
|
35
|
|
|
66
|
|
|
70
|
|
||||
Expected return on plan assets
|
(48
|
)
|
|
(56
|
)
|
|
(96
|
)
|
|
(112
|
)
|
||||
Amortization of prior service cost/(credit)
|
2
|
|
|
2
|
|
|
4
|
|
|
4
|
|
||||
|
(13
|
)
|
|
(19
|
)
|
|
(26
|
)
|
|
(38
|
)
|
||||
Net periodic pension expense/(income)
|
$
|
(6
|
)
|
|
$
|
(9
|
)
|
|
$
|
(12
|
)
|
|
$
|
(19
|
)
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
($ in millions)
|
August 3,
2019 |
|
August 4,
2018 |
|
August 3,
2019 |
|
August 4,
2018 |
||||||||
Net (gain)/loss from sale of non-operating assets
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
Investment income from Home Office Land Joint Venture
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
||||
Net (gain)/loss from sale of operating assets
|
7
|
|
|
(40
|
)
|
|
3
|
|
|
(57
|
)
|
||||
Impairments
|
—
|
|
|
52
|
|
|
—
|
|
|
52
|
|
||||
Other
|
(3
|
)
|
|
1
|
|
|
(4
|
)
|
|
—
|
|
||||
Total expense/(income)
|
$
|
3
|
|
|
$
|
12
|
|
|
$
|
(2
|
)
|
|
$
|
(6
|
)
|
•
|
Reducing and enhancing our inventory position;
|
•
|
Strengthening our integrated omnichannel strategy;
|
•
|
Redesigning and improving core store processes;
|
•
|
Improving our shrink results; and
|
•
|
Revamping our merchandise assortments and strategies.
|
▪
|
Total net sales were $2,509 million with a total net sales decrease of 9.2% compared to the second quarter of 2018 and a comparable store sales decrease of 9.0%. Excluding the impact of the Company's exit from major appliances and in-store furniture categories, comparable sales decreased 6.0% for the quarter. See the reconciliation of comparable store sales increase/(decrease), the most directly comparable generally accepted accounting principle (GAAP) financial measure, to adjusted comparable store sales increase/(decrease) (non-GAAP) on page 28.
|
▪
|
Credit income and other was $110 million compared to $67 million in last year's second quarter. The increase was due to an increase in our income share which resulted from improved performance of the credit portfolio.
|
▪
|
Cost of goods sold, which excludes depreciation and amortization, as a percentage of Total net sales decreased to 63.2% compared to 66.3% in the same period last year. The decrease as a rate of sales was primarily driven by lower permanent markdowns, improved shrink as a rate of net sales, improvements in selling margins and the exit of major appliance and in-store furniture categories earlier this year.
|
▪
|
Selling, general and administrative (SG&A) expenses as a percentage of Total net sales increased to 34.7% for the second quarter of 2019 as compared to 31.9% for the same period last year. Last year, SG&A included approximately $7 million in expense offsets related to the buyout of a leasehold interest. Additionally, due to the implementation of the new lease accounting standard, approximately $5 million in expenses for the second quarter related to the Company's home office lease, which were previously classified as interest and depreciation, are now included in SG&A.
|
▪
|
Our net loss was $48 million, or ($0.15) per share, compared to a net loss of $101 million, or ($0.32) per share, for the corresponding prior year quarter. Results for this quarter included the following amounts that are not directly related to our ongoing core business operations:
|
▪
|
$7 million, or ($0.01) per share, of restructuring and management transition charges;
|
▪
|
$13 million, or $0.04 per share, for other components of net periodic pension income;
|
▪
|
$1 million gain on extinguishment of debt; and
|
▪
|
$1 million net gain on the sale of non-operating assets.
|
▪
|
Adjusted net loss (non-GAAP) was $56 million, or ($0.18) per share, compared to an adjusted net loss (non-GAAP) of $120 million, or ($0.38) per share, in last year's second quarter. See the reconciliation of net income/(loss) and diluted EPS, the most directly comparable GAAP financial measures, to adjusted net income/(loss) (non-GAAP) and adjusted diluted EPS (non-GAAP) on page 27.
|
▪
|
Adjusted earnings before interest expense, income tax (benefit)/expense and depreciation and amortization (Adjusted EBITDA) (non-GAAP) was $160 million, a $55 million improvement from the same period last year. See the reconciliation of net income/(loss), the most directly comparable GAAP financial measure, to Adjusted EBITDA (non-GAAP) on page 27.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
($ in millions, except EPS)
|
August 3,
2019 |
|
August 4,
2018 |
|
August 3,
2019 |
|
August 4,
2018 |
||||||||
Total net sales
|
$
|
2,509
|
|
|
$
|
2,762
|
|
|
$
|
4,948
|
|
|
$
|
5,346
|
|
Credit income and other
|
110
|
|
|
67
|
|
|
226
|
|
|
154
|
|
||||
Total revenues
|
2,619
|
|
|
2,829
|
|
|
5,174
|
|
|
5,500
|
|
||||
Total net sales increase/(decrease) from prior year
|
(9.2
|
)%
|
|
(7.5
|
)%
|
|
(7.4
|
)%
|
|
(6.0
|
)%
|
||||
Comparable store sales increase/(decrease) (1)
|
(9.0
|
)%
|
|
0.3
|
%
|
|
(7.3
|
)%
|
|
0.2
|
%
|
||||
Adjusted comparable store sales increase/(decrease) (non-GAAP) (2)
|
(6.0
|
)%
|
|
0.8
|
%
|
|
(5.6
|
)%
|
|
0.3
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||
Costs and expenses/(income):
|
|
|
|
|
|
|
|
||||||||
Cost of goods sold (exclusive of depreciation and amortization shown separately below)
|
1,585
|
|
|
1,831
|
|
|
3,215
|
|
|
3,543
|
|
||||
Selling, general and administrative
|
870
|
|
|
880
|
|
|
1,726
|
|
|
1,706
|
|
||||
Depreciation and amortization
|
137
|
|
|
140
|
|
|
284
|
|
|
281
|
|
||||
Real estate and other, net
|
3
|
|
|
12
|
|
|
(2
|
)
|
|
(6
|
)
|
||||
Restructuring and management transition
|
7
|
|
|
2
|
|
|
27
|
|
|
9
|
|
||||
Total costs and expenses
|
2,602
|
|
|
2,865
|
|
|
5,250
|
|
|
5,533
|
|
||||
Operating income/(loss)
|
17
|
|
|
(36
|
)
|
|
(76
|
)
|
|
(33
|
)
|
||||
Other components of net periodic pension cost/(income)
|
(13
|
)
|
|
(19
|
)
|
|
(26
|
)
|
|
(38
|
)
|
||||
(Gain)/loss on extinguishment of debt
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
23
|
|
||||
Net interest expense
|
74
|
|
|
79
|
|
|
147
|
|
|
157
|
|
||||
Income/(loss) before income taxes
|
(43
|
)
|
|
(96
|
)
|
|
(196
|
)
|
|
(175
|
)
|
||||
Income tax expense/(benefit)
|
5
|
|
|
5
|
|
|
6
|
|
|
4
|
|
||||
Net income/(loss)
|
$
|
(48
|
)
|
|
$
|
(101
|
)
|
|
$
|
(202
|
)
|
|
$
|
(179
|
)
|
Adjusted EBITDA (non-GAAP) (2)
|
$
|
160
|
|
|
$
|
105
|
|
|
$
|
234
|
|
|
$
|
256
|
|
Adjusted net income/(loss) (non-GAAP) (2)
|
$
|
(56
|
)
|
|
$
|
(120
|
)
|
|
$
|
(203
|
)
|
|
$
|
(189
|
)
|
Diluted EPS
|
$
|
(0.15
|
)
|
|
$
|
(0.32
|
)
|
|
$
|
(0.63
|
)
|
|
$
|
(0.57
|
)
|
Adjusted diluted EPS (non-GAAP) (2)
|
$
|
(0.18
|
)
|
|
$
|
(0.38
|
)
|
|
$
|
(0.64
|
)
|
|
$
|
(0.60
|
)
|
Ratios as a percent of total net sales:
|
|
|
|
|
|
|
|
||||||||
Cost of goods sold
|
63.2
|
%
|
|
66.3
|
%
|
|
65.0
|
%
|
|
66.3
|
%
|
||||
SG&A
|
34.7
|
%
|
|
31.9
|
%
|
|
34.9
|
%
|
|
31.9
|
%
|
||||
Operating income/(loss)
|
0.7
|
%
|
|
(1.3
|
)%
|
|
(1.5
|
)%
|
|
(0.6
|
)%
|
(1)
|
Comparable store sales are presented on a 52-week basis and include sales from all stores, including sales from services, that have been open for 12 consecutive full fiscal months and Internet sales. Stores closed for an extended period are not included in comparable store sales calculations, while stores remodeled and minor expansions not requiring store closure remain in the calculations. Certain items, such as sales return estimates and store liquidation sales, are excluded from the Company’s calculation. Our definition and calculation of comparable store sales may differ from other companies in the retail industry.
|
(2)
|
See “Non-GAAP Financial Measures” for a discussion of this non-GAAP measure and reconciliation to its most directly comparable GAAP financial measure and further information on its uses and limitations.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
($ in millions)
|
August 3,
2019 |
|
August 4,
2018 |
|
August 3,
2019 |
|
August 4,
2018 |
||||||||
Total net sales
|
$
|
2,509
|
|
|
$
|
2,762
|
|
|
$
|
4,948
|
|
|
$
|
5,346
|
|
Sales percent increase/(decrease):
|
|
|
|
|
|
|
|
||||||||
Total net sales
|
(9.2
|
)%
|
|
(7.5
|
)%
|
|
(7.4
|
)%
|
|
(6.0
|
)%
|
||||
Comparable store sales
|
(9.0
|
)%
|
|
0.3
|
%
|
|
(7.3
|
)%
|
|
0.2
|
%
|
||||
Adjusted comparable store sales increase/(decrease) (non-GAAP) (1)
|
(6.0
|
)%
|
|
0.8
|
%
|
|
(5.6
|
)%
|
|
0.3
|
%
|
(1)
|
See “Non-GAAP Financial Measures” for a discussion of this non-GAAP measure and reconciliation to its most directly comparable GAAP financial measure and further information on its uses and limitations.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||
($ in millions)
|
August 3, 2019
|
|
August 3, 2019
|
||||
Comparable store sales increase/(decrease)
|
$
|
(240
|
)
|
|
$
|
(378
|
)
|
Closed stores and other
|
(13
|
)
|
|
(20
|
)
|
||
Total net sales increase/(decrease)
|
$
|
(253
|
)
|
|
$
|
(398
|
)
|
•
|
Stores increase Internet sales by providing customers opportunities to view, touch and/or try on physical merchandise before ordering online.
|
•
|
Our website increases store sales as in-store customers have often pre-shopped online before shopping in the store, including verification of which stores have online merchandise in stock.
|
•
|
Most Internet purchases are easily returned in our stores.
|
•
|
JCPenney Rewards can be earned and redeemed online or in stores.
|
•
|
In-store customers can order from our website with the assistance of associates in our stores or they can shop our website from the JCPenney app while inside the store.
|
•
|
Customers who utilize the JCPenney app can receive mobile coupons to use when they check out both online or in our stores.
|
•
|
Internet orders can be shipped from a dedicated jcpenney.com fulfillment center, a store, a store merchandise distribution center, a regional warehouse, directly from vendors or any combination of the above.
|
•
|
Certain categories of store inventory can be accessed and purchased by jcpenney.com customers and shipped directly to the customer's home from the store.
|
•
|
Internet orders can be shipped to stores for customer pick up.
|
•
|
"Buy online and pick up in store same day" is available in all of our stores.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||
|
August 3,
2019 |
|
August 4,
2018 |
|
August 3,
2019 |
|
August 4,
2018 |
||||
JCPenney department stores
|
|
|
|
|
|
|
|
||||
Beginning of period
|
861
|
|
|
871
|
|
|
864
|
|
|
872
|
|
Stores opened
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
Closed stores
|
(15
|
)
|
|
(7
|
)
|
|
(18
|
)
|
|
(8
|
)
|
End of period (1)
|
846
|
|
|
865
|
|
|
846
|
|
|
865
|
|
(1)
|
Gross selling space, including selling space allocated to services and licensed departments, was 93 million square feet as of August 3, 2019 and 95 million square feet as of August 4, 2018.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
($ in millions)
|
August 3,
2019 |
|
August 4,
2018 |
|
August 3,
2019 |
|
August 4,
2018 |
||||||||
Home office and stores
|
$
|
4
|
|
|
$
|
2
|
|
|
$
|
23
|
|
|
$
|
9
|
|
Management transition
|
3
|
|
|
—
|
|
|
4
|
|
|
—
|
|
||||
Total
|
$
|
7
|
|
|
$
|
2
|
|
|
$
|
27
|
|
|
$
|
9
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
($ in millions)
|
August 3,
2019 |
|
August 4,
2018 |
|
August 3,
2019 |
|
August 4,
2018 |
||||||||
Net (gain)/loss from sale of non-operating assets
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
Investment income from Home Office Land Joint Venture
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
||||
Net (gain)/loss from sale of operating assets
|
$
|
7
|
|
|
$
|
(40
|
)
|
|
3
|
|
|
(57
|
)
|
||
Impairments
|
—
|
|
|
52
|
|
|
—
|
|
|
52
|
|
||||
Other
|
(3
|
)
|
|
1
|
|
|
(4
|
)
|
|
—
|
|
||||
Total expense/(income)
|
$
|
3
|
|
|
$
|
12
|
|
|
$
|
(2
|
)
|
|
$
|
(6
|
)
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
($ in millions)
|
August 3, 2019
|
|
August 4, 2018
|
|
August 3, 2019
|
|
August 4, 2018
|
||||||||
Net income/(loss)
|
$
|
(48
|
)
|
|
$
|
(101
|
)
|
|
$
|
(202
|
)
|
|
$
|
(179
|
)
|
Add: Net interest expense
|
74
|
|
|
79
|
|
|
147
|
|
|
157
|
|
||||
Add: (Gain)/loss on extinguishment of debt
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
23
|
|
||||
Add: Income tax expense/(benefit)
|
5
|
|
|
5
|
|
|
6
|
|
|
4
|
|
||||
Add: Depreciation and amortization
|
137
|
|
|
140
|
|
|
284
|
|
|
281
|
|
||||
Add: Restructuring and management transition charges
|
7
|
|
|
2
|
|
|
27
|
|
|
9
|
|
||||
Add: Other components of net periodic pension cost/(income)
|
(13
|
)
|
|
(19
|
)
|
|
(26
|
)
|
|
(38
|
)
|
||||
Less: Net (gain)/loss on the sale of non-operating assets
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
||||
Less: Proportional share of net income from joint venture
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
||||
Adjusted EBITDA (non-GAAP)
|
$
|
160
|
|
|
$
|
105
|
|
|
$
|
234
|
|
|
$
|
256
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
($ in millions, except per share data)
|
August 3,
2019 |
|
August 4,
2018 |
|
August 3,
2019 |
|
August 4,
2018 |
||||||||
Net income/(loss)
|
$
|
(48
|
)
|
|
$
|
(101
|
)
|
|
$
|
(202
|
)
|
|
$
|
(179
|
)
|
Diluted EPS
|
$
|
(0.15
|
)
|
|
$
|
(0.32
|
)
|
|
$
|
(0.63
|
)
|
|
$
|
(0.57
|
)
|
Add: Restructuring and management transition charges (1)
|
7
|
|
|
2
|
|
|
27
|
|
|
9
|
|
||||
Add: Other components of net periodic pension cost/(income) (1)
|
(13
|
)
|
|
(19
|
)
|
|
(26
|
)
|
|
(38
|
)
|
||||
Add: (Gain)/loss on extinguishment of debt (1)
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
23
|
|
||||
Less: Net (gain)/loss on sale of non-operating assets (1)
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
||||
Less: Proportional share of net income from joint
venture (1)
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
||||
Less: Tax impact resulting from other comprehensive income allocation (2)
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(3
|
)
|
||||
Adjusted net income/(loss) (non-GAAP)
|
$
|
(56
|
)
|
|
$
|
(120
|
)
|
|
$
|
(203
|
)
|
|
$
|
(189
|
)
|
Adjusted diluted EPS (non-GAAP)
|
$
|
(0.18
|
)
|
|
$
|
(0.38
|
)
|
|
$
|
(0.64
|
)
|
|
$
|
(0.60
|
)
|
(1)
|
Adjustments reflect no tax effect due to the impact of the Company's tax valuation allowance.
|
(2)
|
Represents the net tax benefit that resulted from our other comprehensive income allocation between our Operating loss and Accumulated other comprehensive income.
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||
|
August 3, 2019
|
|
August 4, 2018
|
|
August 3, 2019
|
|
August 4, 2018
|
||||
Comparable store sales increase/(decrease)
|
(9.0
|
)%
|
|
0.3
|
%
|
|
(7.3
|
)%
|
|
0.2
|
%
|
Impact related to major appliance and in-store furniture categories
|
3.0
|
%
|
|
0.5
|
%
|
|
1.7
|
%
|
|
0.1
|
%
|
Adjusted comparable store sales increase/(decrease) (non-GAAP)
|
(6.0
|
)%
|
|
0.8
|
%
|
|
(5.6
|
)%
|
|
0.3
|
%
|
|
Six Months Ended
|
||||||
($ in millions)
|
August 3,
2019 |
|
August 4,
2018 |
||||
Cash and cash equivalents
|
$
|
175
|
|
|
$
|
182
|
|
Merchandise inventory
|
2,471
|
|
|
2,824
|
|
||
Property and equipment, net
|
3,591
|
|
|
4,058
|
|
||
|
|
|
|
||||
Total debt (1)
|
3,786
|
|
|
4,002
|
|
||
Stockholders’ equity
|
963
|
|
|
1,216
|
|
||
Total capital
|
4,749
|
|
|
5,218
|
|
||
Maximum capacity under our Revolving Credit Facility
|
2,350
|
|
|
2,350
|
|
||
Cash flow from operating activities
|
1
|
|
|
(135
|
)
|
||
Free cash flow (non-GAAP) (2)
|
(133
|
)
|
|
(235
|
)
|
||
Capital expenditures (3)
|
146
|
|
|
221
|
|
||
Ratios:
|
|
|
|
||||
Total debt-to-total capital (4)
|
80
|
%
|
|
77
|
%
|
||
Cash-to-total debt (5)
|
5
|
%
|
|
5
|
%
|
(1)
|
Includes long-term debt, net of unamortized debt issuance costs, including current maturities and any borrowings under our revolving credit facility.
|
(2)
|
See “Free Cash Flow” below for a reconciliation of this non-GAAP financial measure to its most directly comparable GAAP financial measure and further information on its uses and limitations.
|
(3)
|
As of the end of the second quarters of 2019 and 2018, we had accrued capital expenditures of $28 million and $38 million, respectively.
|
(4)
|
Total debt and other financing obligations divided by total capital.
|
(5)
|
Cash and cash equivalents divided by total debt.
|
|
Six Months Ended
|
||||||
($ in millions)
|
August 3,
2019 |
|
August 4,
2018 |
||||
Net cash provided by/(used in) operating activities (GAAP)
|
$
|
1
|
|
|
$
|
(135
|
)
|
Add:
|
|
|
|
||||
Proceeds from sale of operating assets
|
12
|
|
|
121
|
|
||
Less:
|
|
|
|
||||
Capital expenditures (1)
|
(146
|
)
|
|
(221
|
)
|
||
Free cash flow (non-GAAP)
|
$
|
(133
|
)
|
|
$
|
(235
|
)
|
|
|
|
|
||||
Net cash provided by/(used in) investing activities (2)
|
$
|
(133
|
)
|
|
$
|
(100
|
)
|
Net cash provided by/(used in) financing activities
|
$
|
(26
|
)
|
|
$
|
(41
|
)
|
(1)
|
As of the end of the second quarters of 2019 and 2018, we had accrued capital expenditures of $28 million and $38 million, respectively.
|
(2)
|
Net cash provided by investing activities includes capital expenditures and proceeds from sale of operating assets, which are also included in our computation of free cash flow.
|
|
Corporate
|
|
Outlook
|
Fitch Ratings
|
B-
|
|
Stable
|
Moody’s Investors Service, Inc.
|
Caa1
|
|
Stable
|
Standard & Poor’s Ratings Services
|
CCC+
|
|
Negative
|
•
|
customer response to our marketing and merchandise strategies;
|
•
|
our ability to achieve profitable sales and to make adjustments in response to changing conditions;
|
•
|
our ability to respond to competitive pressures in our industry;
|
•
|
our ability to effectively manage inventory;
|
•
|
the success of our omnichannel strategy;
|
•
|
our ability to gather accurate and relevant data and effectively utilize that data in our strategic planning and decision making;
|
•
|
our ability to benefit from investments in our stores;
|
•
|
our ability to respond to any unanticipated changes in expected cash flows, liquidity and cash needs, including our ability to obtain any additional financing or other liquidity enhancing transactions, if and when needed;
|
•
|
our ability to achieve positive cash flow;
|
•
|
our ability to access an adequate and uninterrupted supply of merchandise from suppliers at expected levels and on acceptable terms;
|
•
|
changes to the regulatory environment in which our business operates; and
|
•
|
general economic conditions.
|
•
|
counterparty credit risk;
|
•
|
the risk that the duration or amount of the hedge may not match the duration or amount of the related liability;
|
•
|
the hedging transactions may be adjusted from time to time in accordance with accounting rules to reflect changes in fair values, downward adjustments or “mark-to-market losses,” which would affect our stockholders’ equity; and
|
•
|
the risk that we may not be able to meet the terms and conditions of the hedging instruments, in which case we may be required to settle the instruments prior to maturity with cash payments that could significantly affect our liquidity.
|
•
|
potential disruptions in manufacturing, logistics and supply;
|
•
|
changes in duties, tariffs, quotas and voluntary export restrictions on imported merchandise;
|
•
|
strikes and other events affecting delivery;
|
•
|
consumer perceptions of the safety of imported merchandise;
|
•
|
product compliance with laws and regulations of the destination country;
|
•
|
product liability claims from customers or penalties from government agencies relating to products that are recalled, defective or otherwise noncompliant or alleged to be harmful;
|
•
|
concerns about human rights, working conditions and other labor rights and conditions and environmental impact in foreign countries where merchandise is produced and raw materials or components are sourced, and changing labor, environmental and other laws in these countries;
|
•
|
local business practice and political issues that may result in adverse publicity or threatened or actual adverse consumer actions, including boycotts;
|
•
|
compliance with laws and regulations concerning ethical business practices, such as the U.S. Foreign Corrupt Practices Act; and
|
•
|
economic, political or other problems in countries from or through which merchandise is imported.
|
|
|
|
|
Incorporated by Reference
|
|
|
||||||
Exhibit No.
|
|
Exhibit Description
|
|
Form
|
|
SEC
File No.
|
|
Exhibit
|
|
Filing
Date
|
|
Filed (†)
Herewith
(as indicated)
|
3.1
|
|
|
10-Q
|
|
001-15274
|
|
3.1
|
|
6/8/2011
|
|
|
|
3.2
|
|
|
8-K
|
|
001-15274
|
|
3.1
|
|
7/21/2016
|
|
|
|
3.3
|
|
|
8-K
|
|
001-15274
|
|
3.1
|
|
8/22/2013
|
|
|
|
10.1
|
|
|
|
8-K
|
|
001-15274
|
|
10.1
|
|
5/24/2019
|
|
|
10.2
|
|
|
|
|
|
|
|
|
|
|
†
|
|
31.1
|
|
|
|
|
|
|
|
|
|
|
†
|
|
31.2
|
|
|
|
|
|
|
|
|
|
|
†
|
|
32.1
|
|
|
|
|
|
|
|
|
|
|
†
|
|
32.2
|
|
|
|
|
|
|
|
|
|
|
†
|
|
101.INS
|
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
|
|
|
|
|
|
|
|
|
|
†
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
|
|
|
|
|
|
†
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
|
|
|
|
|
†
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
|
|
|
|
|
†
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
|
|
|
|
†
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
|
|
|
†
|
|
J. C. PENNEY COMPANY, INC.
|
|
|
By
|
/s/ Steve Whaley
|
|
Steve Whaley
Senior Vice President, Principal Accounting Officer and Controller
(Principal Accounting Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of J. C. Penney Company, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
/s/ Jill Soltau
|
|
Jill Soltau
|
|
Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of J. C. Penney Company, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
/s/ Bill Wafford
|
|
Bill Wafford
|
|
Executive Vice President, Chief Financial Officer
|
(1)
|
the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
|
/s/ Jill Soltau
|
|
Jill Soltau
|
|
Chief Executive Officer
|
|
/s/ Bill Wafford
|
|
Bill Wafford
|
|
Executive Vice President, Chief Financial Officer
|