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JC Penney general overview
JC Penney is in the midst of a turn around and despite
a brief falter at the beginning of 2003, the course is set
for continued growth both at the brick and mortar shops
and at the catalog and internet points of sale. At the annual
meeting of shareholders held May 14, 2004, chairman Allen
Questrom pointed to the firm’s commitment for growth,
cutting operating costs and to providing a pleasant shopping
experience by providing quality and fashionable merchandise
at all of the points of sale. Read on for more information
on JC Penney’s strategy for success, their current
sales figures and for more information on the future!
Remarks by Chairman Allen Questrom at Annual Meeting of
Shareholders In 2003, the Company continued to make significant
progress in the turnaround of the core Department Stores
and the Catalog/Internet business. For the third year in
a row, JC Penney posted the best comparable store sales
performance of any mall based department store and improved
operating profits by 13%. This is particularly impressive
when we recall how difficult the start of the year was for
us and for the entire industry.
Consumer confidence hit a 20–year low of 68 from the
baseline of 100. Unemployment was nearly as high as at any
time in the last nine years. Sales at department stores
hit a 10-year low, and apparel spending was down almost
2%. And the nation was faced with the outbreak of war in
Iraq. We faced a very tough start to the year.
After a very disappointing first quarter, where our comparable
store results were down almost 5%, the Department Store
team went back to the drawing board, re-examined what needed
to be fixed, and we re-focused our plans and strategies.
With a great deal of effort, we were able to get back on
track in the latter part of the year and ended the total
year with a comparable store sales increase of almost 1%.
Catalog and Internet also made excellent progress, and
in 2003, began to fully benefit from the major structural
changes that have been made over the past several years.
Our Internet site, in particular, experienced a very successful
year with sales growth of 50% from the prior year. We expect
our Internet channel will continue to provide a competitive
advantage for the Company. Returning our singular focus
to the Department Store and Catalog/Internet business will
ultimately result in a more successful company for our customers,
our associates, and our shareholders.
In the Department Stores, Vanessa Castagna and her team
continue to focus on providing the customer with clear reasons
to shop JC Penney first.
Merchandise assortments – which are a blend of JC
Penney private brands and destination national brands –
are more fashionable and trend right and continue to deliver
our famed quality and value.
We are promoting JC Penney as America’s year-round
gift headquarters and now feature prominent gift-giving
merchandise statements throughout the store, throughout
the year.
We have grown our leadership position in merchandise categories
where customers already think of JC Penney first: areas
such as fine jewelry, window coverings, and men’s clothing
and furnishings.
And we have strengthened our already dominant position
in merchandise basics such as towels, jeans, and underwear
through improvements in distribution, expanded sizes, and
depth of stock on key sizes.
In marketing, we have strengthened our customer message
by placing greater emphasis on JC Penney’s points of
difference. We’ve subtly changed our marketing message
from "It’s All Inside" to "Have You
Seen What’s Inside JC Penney?" It’s a versatile
handle that allows us to communicate our distinct points
of difference, particularly customer convenience, and gives
her another reason to choose JC Penney first.
We are the only major apparel and home furnishings retailer
with a comprehensive presence in three channels: over a
thousand Store locations, a strong Catalog operation that
publishes over 90 titles during the year with a combined
reach of over 17 million households, and our state-of-the-art
Internet site. These three shopping choices provide our
customers with unbeatable selection, convenience, and the
flexibility to shop with us 24 hours a day, seven days a
week.
Our three-channel advantage also gives customers a breadth
of merchandise offerings and an expanded range of size and
color choices that is unmatched in the industry.
We’ve also made refinements to our in-store presentation,
primarily to make it more convenient for our customers to
shop. And we’ve grown more consistent in our visual
presentation from store to store.
As a result of these efforts, we see solid evidence that
the customer is responding. In a recent Wall Street Journal
article, JC Penney was recognized for achieving the highest
score, and largest improvement, among mall-based department
store competitors on the University of Michigan’s American
Customer Satisfaction Index.
Now turning to JC Penney Catalog and Internet – for
the past three years, our efforts to reposition the Big
Books and specialty catalogs have centered on refining our
infrastructure as well as improving the fashion, quality,
and value of our merchandise assortments. Those efforts
were rewarded in 2003. Last year, we didn’t just stabilize
the operation, but, for the first time since the start of
the turnaround, grew sales and made a positive contribution
to the Company’s overall results.
I’m especially pleased with the rapid growth of our
Internet channel. With sales of over $600 million in 2003,
a 50% improvement from 2002, we are well on our way to achieving
sales of $1 billion in the next few years – quite possibly
as early as 2006.
Our core business – Department Stores, Catalog and
Internet – has made tremendous progress over the past
three years with significant improvement in both sales and
operating profit. As we continue to gain experience and
mature within our new centralized environment, I remain
confident in our ability to achieve our stated turnaround
operating profit goal of 6 to 8% of sales in 2005.
We plan to open 14 department stores in 2004, the largest
increase in the last five years. About half will be off-mall.
This is a new concept we are testing and we have already
opened four stores in this format and they are performing
very well to date. These off-mall stores give us an opportunity
to be positioned where there’s new population growth
or where we need to expand our presence in existing markets.
And they provide our customers another convenient reason
to shop JC Penney first.
We will also devote our attention to another key priority
in 2004: reducing operating expenses without compromising
our level of customer service. In 2003, we announced a broad
initiative aimed at streamlining operations, eliminating
redundancies, and moving toward a more competitive cost
structure – all made possible by our new centralized
environment. By the time this initiative is completed over
the next two years, we expect to achieve savings in excess
of $200 million annually.
JC Penney Reports May Sales
J. C. Penney Company, Inc. (NYSE:JCP) reported that comparable
department store sales increased 9.1 percent for the four
weeks ended May 29, 2004. Sales reflected strength in both
fashion and basic merchandise throughout the month, particularly
during Mother’s Day events. Catalog/Internet sales
were even with last year, with Internet continuing to experience
strong growth, increasing over 35 percent for the month.
The Company is pleased with the early response to its Chris
Madden line of home décor and furnishings launched
in early May. This merchandise is currently available in
most department stores and on the Internet and will be in
catalog print media beginning in late June.
For June, the Company currently expects comparable department
store sales to be up low single digits and catalog/Internet
sales to be about flat.
The Company is pleased with its results in May, particularly
since last May represented the first positive sales increase
of 2003. However, it is early in the quarter, and there
continue to be concerns over the impact that higher energy
prices and other external issues may have on the consumer.
Accordingly, the Company is maintaining its earnings guidance
in the area of six cents per share for the second quarter
compared to a three cent loss in last year’s period.
Penney Begins Search for CEO
JC Penney Co., still in a turnaround campaign started
by chief executive Allen J. Questrom, has begun looking
for its next CEO, The New York Times reported. The department
store company's board of directors has hired an executive-search
firm to find a successor to Questrom, whose five-year contract
expires in September 2005, a spokesman told the Times.
Penney hired Heidrick & Struggles International Inc.
last month, Tim Lyons, a Penney spokesman, told the Times.
He said the company has used the firm to fill other executive
vacancies. Lyons told the newspaper the board asked Heidrick
& Struggles to consider both inside and outside candidates.
He declined to say how much Penney was paying the search
firm.
Questrom was asked last month how long he would stay, but
he didn't say much beyond noting that his succession was
being discussed inside the company, the Times reports. The
64-year-old Questrom was CEO of Neiman Marcus, then chairman
and CEO of Federated Department Stores Inc. until 1997,
the Times says. After a two-year retirement, he was named
chairman and CEO of Barney's New York in May 1999 and took
the top job at Penney in September 2000.
Toddler and infant department
overview
The house tag Okie Dokie has a corner, or better
said several corners, on the competition here. They are
the featured brand on the table top programs, the walls
and on most of the four ways! The tag line of the brand,
“ Pieces that play well with others” is catchy
and right on! Osh Kosh is also important here with several
mini groupings of red, white and blue coordinates on deck
for the 4th of July celebrations. Bright Futures has much
of the infant and layette market covered while Baby Togs
offered baby sportswear with matching shoes as give aways.
The new kids on the block here included Dickies for baby
(the mini mechanics jackets and ‘stickies’ pants
are a scream!) and JNCO who offered some screened tees and
fun shorts. On the girl’s side, we see Mudd and Zana
Di offering some cute separates that fit right into the
mix. Carter’s and Carter’s Classics also held
much of the floor with their corporate fixtures that sadly
had been decimated by sales and not so diligent sales staff.
However, their signature animal creepers in looped terry
and their classic three piece layette sets continue to represent
quality and value here.
Opportunities in the infant's
and toddler's department
The only down side to this department was the sheer
volume of merchandise on the floor. It was so congested
that even the cutest items and best brands were drowned
out and had lost their cachet. Cleaning up and paring down
are therefore the first order of business. In terms of items
to add, perhaps some cheeky attitude tees, and more big
kid brands down sizing their fun fashions like Dickies,
JNCO and Mudd!
A look into the department:
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