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Retailers Report Profit in Quarter

February 21, 2003|From Reuters

Major U.S. retailers reported higher fourth-quarter profits Thursday, although many relied on cost-cutting and credit card business to offset a disappointing holiday shopping season.

J.C. Penney Co. beat earnings forecasts, while Target Corp. just managed to hit its mark, but Target's shares fell amid concerns about its credit card business.

Upscale retailer Nordstrom Inc. reported an 18% jump in quarterly profit, just ahead of Wall Street expectations, as it kept costs in check.

Companies kept profit and sales forecasts for the year conservative, with most predicting stronger growth in the second half than in the first half.

Most U.S. retailers operate on a fiscal year ending in January to reflect after-Christmas clearance sales, so February is a major month for earnings reports.

Penney, one of the few retailers to post better-than-expected holiday sales, said fourth-quarter profit doubled, topping a forecast it raised earlier this month. Penney posted profit of $202 million, or 68 cents a share, for the fourth quarter ended Jan. 25, compared with $95 million, or 32 cents, a year earlier.

Analysts on average were expecting 66 cents a share, according to Thomson First Call.

The company forecast earnings for the current year of $1.50 to $1.70 a share. It said the fourth quarter would generate well over half of its full-year profit. In the year just ended, Penney earned $1.25 a share from continuing operations and posted net income of $1.37 a share.

J.C. Penney shares closed up $1.34, or 7.3%, at $19.77 on the New York Stock Exchange after the earnings were released.

Target reported a modest 4.5% gain in quarterly earnings as its credit card unit posted a whopping 41.5% increase in pretax profit.

The retailer earned $688 million, or 75 cents a share, in its fourth quarter ended Feb. 1, compared with $658 million, or 72 cents, a year ago. The earnings matched the average estimate of analysts polled by First Call.

Target shares ended down $1.10, or 4%, at $26.77 on the NYSE after falling as low as $26.50. The earnings were announced before markets closed.

"The bear case on the credit card business is that the rapid growth in the credit portfolio could be masking delinquency trends or reserve problems that we won't know about for a couple of quarters," said Stephanie Hoff, retail analyst with Banc of America Capital Management.

Target said analysts' expectations for this year's earnings of $2.05 a share were "reasonable."

Nordstrom said its fourth-quarter earnings rose to $60 million, or 44 cents a share, in the quarter ended Jan. 31, compared with $50.7 million, or 38 cents, in the same period a year ago. Sales rose 7.3% to $1.75 billion.

Earnings per share this year will rise by as much as 17% to $1.39, Nordstrom said.

Nordstrom shares fell 8 cents to $17.17 on the NYSE before the earnings announcement.

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