J.C. Penney Company, Plano, TX, has retained investment banking firm Credit Suisse First Boston to explore strategic options regarding its Direct Marketing Services (DMS) subsidiary. The options under consideration include a sale of or joint venture involving the subsidiary.
The company’s decision reflects its effort to focus on its department store, catalog, and Eckerd drugstore businesses. DMS markets insurance and other membership service offerings. During the past year the company sold its JCPenney credit card operations to GE Capital.
For the company’s fiscal 1999 year, which ended Jan. 29, DMS had revenue of $1.12 billion, up 9.5% from 1998’s $1.02 billion. The unit had operating profit of $65 million, compared with $62 million in 1998.
The company as a whole had revenue of $32.5 billion in 1999, up 6.7% from $30.5 billion. Net income was $336 million, down from $594 million in 1998.
Signs indicate that a sale of the unit is the most likely result. In a statement, the company said that its would use “any proceeds from a transaction involving DMS, along with the proceeds from the planned Eckerd tracking stock IPO, after that offering is completed, to further reduce the company’s debt and to buy back JCPenney company stock.”
