J. C. Penney Company, Inc. (NYSE:JCP) Q3 2017 Earnings Conference Call Transcript

Nov 10, 2017 • 08:30 am ET


J. C. Penney Company, Inc. (NYSE:JCP) Q3 2017 Earnings Conference Call Transcript


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Good day, ladies and gentlemen, and welcome to the Third Quarter 2017 J.C. Penney Earnings Conference call. At this time, all participants are in a listen-only mode and later we will conduct a question-and-answer session, and instructions will follow at that time. (Operator Instructions) And as a reminder, this conference is being recorded.

I will now like to introduce your host for today's conference, Mr. Trent Kruse. Sir, you may begin.

Trent Kruse

Okay thanks, Amanda, and good morning, everyone.

(Forward-Looking Cautionary Statements)

Please note that no portion of this presentation may be rebroadcast in any form without the prior written consent of J. C. Penney. For those listening after November 10, 2017, please note that this presentation will not be updated, and it is possible that the information discussed will no longer be current. Also, supplemental reference slides are available on our IR website.

While management's will not be speaking directed to the slides, these slides are meant to facilitate your be of the company's results and to be used as a reference document following the call. As a reminder, I want to update you on the presentation change we've made last quarter to our financial statements. We now only disclose our cost of goods sold results for all periods presented and no longer report gross margin on a separate line item. We made this change in Q2 to follow the SEC's preferred presentation methods and disclosures.

To clarify, no changes were made to the actual calculation of gross margin. You can arrive at our standard gross margin by simply taking the inverse number. Joining us on today's call are Marvin Ellison, Chairman and CEO of J.C. Penney; and Jeff Davis, our CFO. Following our prepared remarks, we look forward to taking your questions.

With that, I'll now turn the call over to our Chairman and CEO, Marvin Ellison.

Marvin Ellison

Thank you, Trent, and good morning, everyone. As you know, we took the ball with necessary steps to liquidate apparel inventory in efforts to accelerate a wider transformation of women's department. These steps allowed us to clear out slow-moving inventory this quarter and reset our entire women's department. This reset also gave us the opportunity to expand our women's casual and contemporary offerings.

Following the reset we saw improved performance in our women's division confirming that these actions were necessary to drive growth in this high volume apparel division. In fact, Women's Apparel delivered a positive comp for the month of October even when you remove the benefits of the accelerated clearance sales. Although, we are not declaring victory, this is the first positive comp for a month in this category in 14 months.

While these liquidation steps had a short-term negative impact on profitability in the third quarter, we firmly believe it was the right decision for the company as we transitioned into the fourth quarter and fiscal 2018. At this stage of our turnaround, we are committed to making decisions that benefit the long-term financial health of the Company. In addition,