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Penney Pitches Lenders; Needs More Cash For Rebuilding

J.C. Penney’s CEO Mike Ullman says he needs more cash for operations, renovations and rebuilding the company’s competitiveness in a dog-eat-dog retailing market. Ullman, formerly Penney’s top executive, takes back the CEO’s chair after a 25 percent decline in sales for the last fiscal year. Last year’s loss hit almost $1 billion. Penney’s initial loan of $1.75 billion, arranged by Goldman Sachs, will apparently not be enough to accomplish the turnaround.

In a recent pitch to public lenders in a regulatory filing, Penney offered part of its real estate portfolio with an estimated value of $4.06 billion as backing for the hoped-for cash loan.The filing outlines some of the new measures Ullman will employ to win back the customers lost, and attract new ones. Some old measures, previously abandoned, will be reinstated as well

Funds from the new loan will be used to complete the store renovations begun under recently ousted former CEO Ron Johnson.

Other initiatives include:

A return of the full-color Sunday newspaper advertising inserts.

A direct mail barrage of coupons with pricing incentives.

A public relations campaign apologizing to former customers in an effort to bring them back.

And a return to the promotional pricing strategy that was stopped under former CEO Johnson.  Twenty-six peak shopping periods have been targeted for special pricing promotions in what Penney characterized as part of its planned moves to “reconnect with the customer.”

Penney’s private apparel label, St. John’s Bay, chopped by Johnson despite more than $1 billion in annual sales, will make a comeback.

Some popular brands introduced under Johnson will remain, including Joe Fresh, Happy Chic by Jonathon Adler, and Michael Graves Design.

Penney’s says it is now on “an energetic path to profitable growth.”  Driving that hoped-for return to profitability, says Penney, are marketing and merchandising strategies based on what their customers seem to want.

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