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.
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.