News Feature | November 22, 2013

JCPenney Turnaround Tied To Online Sales And Inventory Refresh

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By Anna Rose Welch, Editorial & Community Director, Advancing RNA

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Company holding extreme sales to refresh inventory, offering Disney products, more Sephora stores, and private label brands to boost sales


Following JCPenney’s third quarter financial results, CEO Myron Ullman seems optimistic about the turnaround effort that’s been underway for the past year or so. He says, “We’re making significant strides toward restoring JCPenney to its rightful place in retail… It’s hard work with no quick fixes, but our team’s rising to the challenge, and our customers tell us they love the progress we’re making.” It’s happening slowly, but JCPenney is beginning to see positive sales momentum, reporting slightly increased comp store sales. For the quarter, the comp sales improved by 710 basis points, reflecting sequential improvement in each of the three months in Q3’13. Similarly, the company reported positive comps in October, a huge achievement for the retailer, as it had been nearly two years since the company had seen such increases.


Company Returns To Its Roots With Inventory

Following the rather traumatic tenure of previous CEO Ron Johnson, who cut private label brands and sales/coupons for everyday low prices, the company has been working tirelessly to bring back the brands and sales that JCPenney customers were missing. For one, JCPenney has reinstated the private brand names including St. John’s Bay and Worthington. In addition, the company saw success in Q3’13 with national brands such as IZOD, Vanity Fair, and Carter’s. In order to do away with a number of remaining brands that didn’t resonate with customers in the past, JCPenney has slashed prices by upwards of 50 percent on lingering Joe Fresh and Arizona brand products. One analyst, Paul Trussel, says “The company has focused on bringing back what I would call its ‘stack ‘em high and watch ‘em fly’ strategy.” Indeed, analysts are citing sale prices as low as $1.97 — an absolute steal for customers during a financially difficult season. In fact, while these prices are low and might not seem to have a huge impact of JCPenney profits, analysts are concerned that these unbelievable deals could put the pressure on competitors Target and Kohls. Their fears that competitors could lose sales in the face of JCPenney’s extreme sales suggests that this could be an important strategy for the slowly growing retailer this holiday season.

The company has also turned to Sephora and Disney brands to keep customers happy. Since 2006 when the company partnered with Sephora, this brand has often been a beacon of light in the midst of some rough financial waters. In the last quarter, the company opened 30 new Sephora’s inside JCPenney locations, bringing the total number of Sephora locations to 446. This will be key to continuing building the store’s relationships with a younger female audience, and will continue to diversify the company’s offerings. Ullman also reports that the company is seeing some positive feedback from its recent partnership with Disney. In October, JCPenney opened Disney children’s boutiques, where parents and children alike are able to purchase Disney Consumer Products designed for and sold exclusively at Penney’s — an important distinction considering Disney is widely distributed at competitor stores like Macy’s, Walmart, and Kohl’s. So far, because of this addition, the company has seen the children’s apparel online sales improve as consumers are drawn to the Disney toys, role-play, and fashion apparel. Seeing More Traffic, More Sales

While the company’s online profile was neglected and began to suffer during CEO Johnson’s tenure, it seems that has been successfully revived during the third quarter. Ullman reports that online sales improved 24.5 percent year-over-year, up from a negative 2.2 percent in Q2’13. Online sales accounted for $266 million in the quarter’s overall sales. In fact, October was a very good month for the company, as it not only saw increasing comps but also a 37.6 percent increase in online sales. The CEO attributes these increases to the company’s long-term efforts to improve user interfaces and merchandise assortment. Tack on a new holiday advertising campaign, Thanksgiving Day shopping hours, and the fact that the company has achieved the best customer services scores in its history, it looks as though JCPenney is well poised to have a successful holiday season and fourth quarter.

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