Suffering from chronic underperformance, J.C. Penney (JCP) is still looking to shed the last remnants of ousted CEO Ron Johnson’s widely discredited turnaround strategy. The department store mega-chain announced it will cut back on some of its more recognizable brands, some of which were introduced by Johnson.
Beginning in January, JCP plans to decrease offerings of its own jcp menswear collection, Martha Stewart home furnishings and Joe Fresh apparel. The new store space will be devoted to private-label brands that have proven more profitable over the last two years like JCP Home and Cooks, St. John’s Bay clothing and Ambrielle lingerie.
CEO Mike Ullman commented, “What we now need is to edit things out that didn’t resonate sufficiently.” He continued, “The customer never gave up on the goods. We gave up on the customer, and we paid a price for it.”
Lately, JCP’s ailing empire has shown some promising signs of vitality, buoying the spirits of anxious investors. According to a JCP spokesperson, the retailer increased its sales in November by ten percent, registering a jump in same-store performance numbers for the second consecutive month. October was also touted by the company as evidence of an increasingly successful turnaround strategy; sales jumped 0.9% for October, a substantial improvement in light of the fact that September suffered a 4 percent decline. A company spokesperson said that the stronger performance was largely attributable to improved inventory in central private brands as well as an overhaul of the home goods department.
And while JCP has not released any hard data regarding its December sales, most analysts expect that it enjoyed a 5 percent increase in sales. JCP reported that it ended the quarter with $1.23 billion in cash, up from last year’s total of $525 million. It continues to carry a substantial debt load, pegged at approximately $5.61 billion.
For the fiscal period ending November 2, JCP endured a staggering $489 million loss, or $1.94 per share, compared to last year’s $123 million loss, or $0.56 per share. Thomson Reuters analysts had expected a better performance, estimating a per share loss of $1.77.
The last fiscal quarter represented the company’s seventh consecutive quarterly net loss. Revenues have been steadily declining from a peak of almost $20 billion in 2007 to about $12 billion last year. In 2012, the company’s net loss was almost $1 billion.
Much of Ullman’s turnaround strategy for JCP amounts to a grand undoing of the damage wrought by former CEO Ron Johnson’s disastrous tenure. Johnson deemphasized promotional discounts, reinvented the home department to focus on more expensive designers and brands and reorganized stores so products were grouped by brand rather than category. JCP is also winding down its controversial deal with Martha Stewart, which Macy’s alleged was an infringement on a preexisting arrangement it had with her company, promising exclusivity.
Many experts believe that JCP’s hopes for recovering lost customers depends on reintroducing lost-cost brands that are immediately recognizable. Bernard Sosnick, an analyst at Gilford Securities said, “A retailer in need depends on shoppers who know it well to begin a recovery. Other shoppers won’t come for quite a while.”
The changes planned by JCP leadership are many. In an effort to squeeze more sales from its existing brands, they will be adding sportswear apparel to its J. Ferrar line of suits. And in an effort to replace the home goods products lost with the departure of Martha Stewart, they will also be expanding their Liz Clairborne brand to include towels and bedding. JCP will limit its selection of home goods from Michael Graves, which has languished.
Ullman seems keenly aware that time is of the essence. He said, “We don’t have six or seven years to get our business back. Half of our business has to be brands that we can produce profitably.”