Will J.C. Penney's Massive Re-Makeover Win Us Back?

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Retail Sales
Mary Altaffer/AP
J.C. Penney is challenged. Against a backdrop of suburban shopping mall decline, the retailer has to attract a new generation while earning forgiveness from the long-time customers it spurned in its last makeover, stay liquid and fight the clicks-vs.-bricks battle.

Giving Customers What They Want

With three CEOs in almost as many years (CEO Myron Ullman returned after the disastrous tenure of Apple and Target alum Ron Johnson), the chain's strategy has returned to pre-Johnson discount pricing, coupons and private label brands like St. John's Bay, which its core customers had sorely missed. To be fair to Johnson, he did spiff up the previously dowdy and cluttered stores. Unlike Walmart (WMT) and Sears Holdings' (SHLD) Sears and Kmart, J.C. Penney isn't inspiring photo-driven articles documenting its disarray.

Other changes announced by Ullman are the return of their home goods collection starting in April, the addition of 46 more in-store Sephora beauty shops (a big draw for younger women), and the closure of 33 underperforming stores.

A fourth quarter 2013 earnings call in late February -- which Ullman characterized as an update on the store's turnaround -- showed a 2 percent rise in same store sales. Other positive commentary on the call prompted Citigroup (C) analyst Oliver Chen to upgrade to buy with an $11 price target.

J.C. Penney has to contend with more successful (and fashion-forward) rival Macy's (M), which lured away many of its core shoppers and has more traction with younger. Macy's has been performing well thanks to CEO Terry Lundgren's localizing strategies. Localizing sends merchandise to the stores whose customers actually buy it -- parkas to Minnesota and swimsuits to Miami. In that call, Ullman announced more localizing at J.C. Penney.

Clicks, Not Bricks

Shoppers are warming to J.C. Penney's online arm: Its sales rose 26.3 percent this last quarter year over year and contributed $381 million to sales. Ullman said the company is focused on "seamless customer experiences between J.C. Penney stores and jcp.com." Ordering on your phone or laptop and in-store pickup is part of the reason Ullman said gross margins should significantly improve in 2014. That's why the company reconfigured the interfaces and made several key hires.

Just six months ago analysts worried whether the chain could make it through one more year. This recent quarter's results have turned rating agencies cautiously optimistic. Standard & Poor's raised its rating from negative to stable. "With liquidity concerns on the back burner (for now), the focus has returned to fundamentals, which for the moment appear to be improving, albeit modestly," said Sterne Agee analyst Charles Grom, who maintains a neutral on J.C. Penney stock.

J.C. Penney has a long way to dig itself out of the hole deepened during Johnson's reign. It has to make itself relevant again in an Amazon (AMZN) world. And Macy's is a tough competitor, more so now that both will compete in home goods again. Macy's also has had a better read on fashion.

Likely J.C. Penney won't be the destination shopping experience Johnson envisioned nor "the leader in American retail" Ullman is prophesying, but it looks like it's staying around.


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192 Comments

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licalee93

Bring back the quality merchandise! Bring back the catalogs, even if they are only online as Lookbooks! I was a loyal customer of JCPenney (emphasis on was). But lately every time I break down and order from them I am disappointed. I can not see why they should not be able to strike a balance between attracting the younger generation and keeping the not quite as young generation happy.

June 25 2014 at 10:14 AM Report abuse +1 rate up rate down Reply
alston_alston1

They have introduced discount pricing, coupons and Private label brands like St John’s Bay which its we solely missed. And I have heard that they are bringing back their home goods collection and they also are to add 46 more in store Sephora beauty shops to attract younger women audience. And the store that are underperforming are about to close. This Massive restructuring is definitely going to affect the company’s outlook positively.Read More http://bit.ly/1n0xsTX

April 11 2014 at 6:21 AM Report abuse rate up rate down Reply
Roger

Visited the Mission Valley store in San Diego yesterday, also purchased a floor cleaner for my daughters Easter gift (family tradition) and found the store alive and looking well, although very slow, other retailers were slow with shoppers as well (Monday.)

April 08 2014 at 11:55 AM Report abuse rate up rate down Reply
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April 06 2014 at 2:25 AM Report abuse rate up rate down Reply
lgnu

I was in one of their stores in Houston yesterday for about 45 minutes. No one offered to help me and the only employees II saw were pushing racks of clothes by me. So my answer to the headline is, NO, remodeling won't help, they need to provide some help for customers.

April 04 2014 at 5:57 AM Report abuse rate up rate down Reply
BarB

NOT AS LONG AS GEORGE SOROS IS THEIR BIGGEST MONEYBAGS, NOT ON YOUR LIFE....THEY WANT HIM AND THOSE TYPES, I DO NOT WANT THEM...NO WONDER THEY ARE DROWNING, THEY HAVE LOST AT LEAST HALF OF THEIR CUSTOMERS WHO DON'T LIKE THOSE LIBERAL STANDARDS THAT ARE ACTUALLY 'NO STANDARDS' AT ALL...ALL THEY WANT IS TO MAKE MONEY AND GEORGE SOROS HAS THE NERVE TO SPEAK ABOUT THE KOCH BROTHERS....HAHAHAHAHA.....HYPOCRISY AT ITS PEAK

April 03 2014 at 6:20 PM Report abuse rate up rate down Reply
BootslaRue44

JC Penny will be around for 300 more yrs or more

April 03 2014 at 6:01 PM Report abuse rate up rate down Reply
bjwhit3

Please bring back Town Craft jeans. Bjwhit3@aol.com

April 03 2014 at 5:37 PM Report abuse rate up rate down Reply
Kensdelrey

I wont go back. Bite me once shame on YOU, Bite me TWICE...Shame on ME ! They treated me like they did not need me. Now I will show them they DO. If they want to support those that have No Morals and stand up for what is wrong let them sleep in their bed they have made with the PERVERTS. You can sugar coat homosexuality any way you want but it still is WRONG, SICK, And Perverted in so many ways.

April 03 2014 at 4:31 PM Report abuse rate up rate down Reply
claudia

Shopped there today. Happy with my purchases, especially when I had a 20% off coupon!

April 03 2014 at 3:55 PM Report abuse rate up rate down Reply