On the holiday quarter, J.C. Penny Co. Inc. (NYSE:JCP) faced a considerable loss followed by the degeneration of dividends. The company faced a huge loss in 2014 of $771 million, and is still working hard to improve it. Yet it has not earned any profit compensating the previous loss.
Besides this giant loss, the company has made it possible to give a free cash flow for the whole year of approximately $57 million. Free cash flows describe the original amount earned by the organization so it is of more value than the total payment.
Due to the supply of weak standard of measurements for health check of business, and a few insupportable tasks, J.C. Penny Co. Inc. (NYSE:JCP) was able to give free cash flows. These free cash flows are extremely dependent on the net earnings of the company.
Three basic things are counted that amplified the company’s free cash flows. It gives a huge amount of $70 million for the sales of functioning property as determined by the free cash flows, which is a single-time thing. If this amount is excluded, the free flows become negative. Secondly, a conference call was conducted about a year before, which revealed an amount of $250 million in capital expenses. Chief Financial Officer of J.C. Penny Co. Inc. (NYSE:JCP) remarked about the company surviving on diet for a short time. According to another calculation it was found that the company had spent more than $950 million on capital expenses, two years ago.
J.C. Penny Co. Inc. (NYSE:JCP) has to preserve a specific level of CAPEX to maintain the company’s assets, where the company is spending well below that level. Expended CAPEX amount by J.C. Penny Co. Inc. (NYSE:JCP) was $300 million yearly, which improved free cash flows, but this improvement is not for a longer time.
Moreover, benefit caused by the alteration in working was $379 million, which was the result of J.C. Penny Co. Inc. (NYSE:JCP) decreasing its inventory levels as compared to the previous year. This move increased the working capital and free cash flow, but this optimization is not possible to happen each year, since when the company wants to expand its sales.
Practicing these scenarios can surely affect the health conditions of the company, as this adjusted free cash flow gives a rough estimate about its position. Since J.C. Penny Co. Inc. (NYSE:JCP) reported a positive free cash flow, it doesn’t mean that the company is making profits and is going strong, it is still far behind. It’s ironic that the company was unable to make profits even during a holiday quarter.
J.C. Penny Co. Inc. (NYSE:JCP) will be working for free cash flows even this year, again through under spending of capital expenditure, along with the expended gains from working capital. Sales are definitely going to be uplifted with improved business strategies. Apart from all these plans, company would still have to wait for several years to earn a considerable profit.
