OPERATIONS

Babies ‘R’ Us launches new loyalty card

BY Staff Writer

Wayne, N.J. – Babies “R” Us launched the Very Important Baby (V.I.B.) program, designed to allow parents an opportunity to earn a 10% bonus savings on baby essentials.

The complimentary V.I.B. card is much like a debit card and can be used toward purchases of any brand of diapers, wipes, formula and baby food at “R” Us stores nationwide. Every time money is loaded onto the card, Babies “R” Us will add 10% – up to $200 annually.

Customers must be members of Rewards “R” Us, the company’s complimentary loyalty program, to take advantage of the V.I.B. program.

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News

Gap Inc. profits plummet on holiday discounting

BY CSA STAFF

SAN FRANCISCO— Gap Inc.’s fourth-quarter net income plummeted 40% on higher costs and aggressive discounting during the holiday selling season.

The company reported that net income for the quarter ended Jan. 28 was $218 million, compared with $365 million a year earlier. Sales dipped to $4.28 billion in the quarter, from $4.36 billion, matching Wall Street estimates.

Same-store sales fell 4%. By division, same-store sales fell 3% at Gap North America, and 6% at Old Navy. Banana Republic’s domestic same-store sales were unchanged compared with the year-ago period. The international division had an 8% decline.

For the full year, profit declined 17% to $833 million. Sales dipped 1% to $14.5 billion for the year, and same-store sales were down 4% compared with a 2% increase last year.

“In spite of 2011 earnings being below last year, we’re pleased with the progress we made against our long-term strategic plan, including growing our online business and expanding internationally,” said Glenn Murphy, chairman and CEO of Gap Inc. “There’s no doubt that improving our performance, especially in our base businesses, is the top priority in 2012, and we’re confident this is the right time to invest wisely to win back customers.”

In fiscal year 2012, the company said it expects to open about 125 company-operated stores, net of repositions, 55 of which are international. About 115 company-owned stores are slated for closure.

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FINANCE

J.C. Penney posts Q4 loss of $87 million amid restructuring, revamp charges

BY Marianne Wilson

Dallas — J.C. Penney Co. swung to a loss of $87 million in the fourth-quarter, compared with a profit of $271 million in the year-ago period. The chain’s results were dragged down by restructuring and management transition charges, as well as costs tied to its new pricing strategy.

Revenue fell 5% to $5.42 billion, reflecting the company’s exit from its catalog business. Analysts expected $5.5 billion. It was the third consecutive quarter of declining revenue. Same-store sales were down 1.8%. Gross margin fell 7.4 percentage points to 30.2%, hurt by heavy markdowns.

"While 2011 was a year of transition at J.C. Penney, 2012 will be a year of transformation," said CEO Ron Johnson. The former Apple stores head became chief executive of J.C. Penney in November.

In January, J.C. Penney announced a three-tier pricing strategy, effective Feb.1, which eliminates short-term discounts and frequent promotions in favor of everyday lower prices (about 40% less than initial prices of a year ago) and clearance events the first and third Friday of each month.

The company also is updating its assortment of brands and the store experience, with a big emphasis on in-store brand shops. The retailer ultimately expects its stores to feature 80 to 100 brand shops

“As we embark on this transformation, the strategic changes we are making to our business model will dramatically simplify J.C. Penney’s operations, significantly lower the company’s cost structure and create a platform for growth that will result in improved profitability in 2012 and beyond," Johnson said.

For the year, J.C. Penney’s total sales decreased 2.8% to $17.3 billion and online sales were essentially flat at $1.5 billion. The company reported an operating loss for the full year of $2 million, which included $451 million of restructuring and management transition charges.

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