J.C. Penney cuts dividend in light of performance
PLANO, Texas, Dec 6 (Reuters) - Retailer J. C. Penney Co. Inc. (NYSE:JCP - news), facing stiff rivalry and a slumping stock price, said Monday it was slashing its dividend almost in half in light of the overall performance of its several businesses.
``Our stores and catalogs have not been performing to our expectations -- except for the e-commerce portion of our catalog business,' J.C. Penney spokesperson Duncan Muir told Reuters.
J.C. Penney, which owns its flagship department stores as well as Eckerd drugstores, said its board set a quarterly dividend of $0.2875 per share, versus its prior quarterly dividend of $0.545. The company, whose stock dropped to a fresh one-year low after the announcement, said the new dividend was payable Feb. 1 to stockholders of record on Jan. 10.
J.C. Penney said it also took into account the potential balance sheet and financial reporting implications of creating a tracking stock for its higher-growth Eckerd drugstore operations. Eckerd had seen strong growth in recent quarters, helping to offset falling sales at J.C. Penney's department stores.
The company added that it closed the sale of its credit card business to General Electric Capital Corp. (NYSE:GE - news). As a result of that deal, J.C. Penney said debt would be reduced by about $4 billion. At the end of January, the company's long- term debt was $7.1 billion and short-term debt weighed in at $1.9 billion, said Muir, who could not immediately provide more recent debt figures.
Chairman and Chief Executive Officer James Oesterreicher said the new dividend rate allows the company to reinvest a significant portion of earnings into businesses' operations, including updating traditional retailing formats, growing its drugstores and expanding its e-commerce business.
J.C. Penney has been squeezed by discount retailers such as Wal-Mart Stores Inc. (NYSE:WMT - news), Kmart Corp. (NYSE:KM - news) and Dayton Hudson's (NYSE:DH - news) Target stores as well as upper-end department stores like Federated Department Stores' (NYSE:FD - news) Macy's and Bloomingdales. Last month, the company reported that third quarter earnings fell 24 percent.
J.C. Penney shares closed at 20-1/8 on the New York Stock Exchange, down 7/8 on the day. Earlier in the session, the stock hit a fresh one-year low of 19-13/16, slipping past its former low of 20-1/2. The stock's year high is 56-1/8. |
