Sometimes the relevance of a retailer is decided by people who don’t shop there. It’s a Wall Street vs. Main Street, high-income vs. mid-to-low-income kind of thing.
JCPenney may be one of those. It’s a department store and is owned by mall operators, two categories in retailing with dismal rap sheets.
But as a privately owned company for more than two years following a difficult bankruptcy restructuring, JCPenney’s new leadership team says the storied brand is a survivor and is returning to the roots that held it up for 120 years.
The Plano-based retailer says its 667 stores and e-commerce business have 50 million customers in households with average annual incomes of $65,000 to $75,000.
JCPenney has closed hundreds of stores since the Great Recession. It has survived a couple of radical transformation attempts to reinvent the department store by Apple retail guru Ron Johnson, and then by Marvin Ellison, now the CEO at Lowe’s, who tried to turn JCPenney into Sears with the addition of major kitchen and laundry appliances. Both tenures cost the department store money, time and customer and employee goodwill — without turning around declining revenues. After facing uncertain temporary store closings by the pandemic three years ago, Penney and dozens of other retailers filed for bankruptcy.
JCPenney made it out with 55,000 employees and is forging a new future. Under new owners and leadership, the chain founded by James Cash Penney in 1902, is bringing back the classic department store strategy that made it one of America’s most iconic retailers.
Bath towels in many colors. Bedding in current fabrics. Dresses for all occasions and sizes. Men’s suits with style. Value in kids’ clothing. Luggage and tabletop. Key national brands throughout, such as Levi’s, Lee and Wrangler in denim plus its own a.n.a. and Arizona. Modern Bride fine jewelry. Salons and photo studios. And the extra 30% and 35% off storewide coupons for JCPenney credit card holders.
“Our customers are making tradeoffs every day,” said JCPenney CEO Marc Rosen. “We’re very clear and focused on our direction, who our customer is, and what are their needs and wants.”
Rosen is the retailer’s third CEO in five years.
JCPenney’s two largest mall landlords Simon and Brookfield are its shareholders along with Authentic Brands, which owns a collection of more than 40 brands. Some of those brands, such as Sports Illustrated athletic apparel, Juicy and Forever 21 junior’s fast fashion, are now sold in JCPenney stores. The group purchased JCPenney out of bankruptcy in December 2020.
“One of our critical success factors is that we’re all aligned; we all want to grow our businesses,” Rosen said. “It takes a great store and online experience to do that.”
Rosen said he is able to invest in the business, which was something that held back the old JCPenney which posted many years of losses.
JCPenney’s debt of about $4 billion forced it into bankruptcy in May 2020. It now has $485 million in long-term debt and liquidity of $1.5 billion. Long-term debt was reduced by $500 million in December 2021.
“We feel good about debt and our strong cash flow,” Rosen said.
Simon Property chairman and CEO David Simon has said a lot about the department store investment including calling it “road kill.” His comments turned positive in the last couple of visits with Wall Street analysts.
JCPenney is “unbelievably profitable,” Simon said in February. “We’re very pleased where that company is positioned. We’re extremely pleased with the management team and all that they’re doing to reinvigorate the brand.”
A separate liquidating trust formed from 160 stores and six distribution centers as part of the bankruptcy reorganization to repay debtholders has disclosed JCPenney’s financials for the nine months ended Oct. 29, 2022.
JCPenney posted a profit of $173 million on revenue of $5.44 billion, down from a profit of $312 million on sales of $5.58 billion in the same months of 2021, according to a January filing. Rosen said men’s and women’s apparel were strong. Excluding beauty, sales were flat as consumers were hit by inflation. Sephora exited stores and the kids’ business was soft as new brands were introduced.
Family brands
“We feel good about the business,” Rosen said. He’s been in place for 17 months and arrived with 25 years of experience at Levi’s and Walmart, brands that also cater to families with limited funds.
He was already working with JCPenney’s chief merchandising officer Michelle Wlazlo while at Levi’s. JCPenney is still one of the biggest Levi’s customers, he said.
Wlazlo never stopped fixing categories and brands from the time she joined the company in March 2019.
A big gap needed to be filled when Sephora ended a 15-year partnership and started to move its in-store shops to Kohl’s in 2021. JCPenney Beauty debuted in October 2021 in a partnership with Thirteen Lune, an inclusive e-commerce site featuring brands for all race, gender, skin tones, hair types and budgets.
JCPenney Beauty will be in 608 stores this spring and has gained positive reviews while helping it with its stated goal to be the retailer of choice for Americans with diverse backgrounds.
Home goods needed some work. The mainstay brand of Fieldcrest bath towels is back in the mix along with Distant Lands, a new JCPenney brand of deep jewel color towels, Wlazlo said.
In the past four years, Penney has launched or relaunched 25 brands and 10 of them are new. Mannequins became larger to be more inclusive. A couple of $500-million-a-year brands which at one time were $1 billion brands, became more defined. St. John’s Bay is timeless basic apparel while women’s label a.n.a. is more fashion-forward.
“Some brands just needed to be nurtured and loved,” Wlazlo said. Her first project was to make JCPenney’s own a.n.a. brand a denim authority by fit, color and style silhouette. Denim is now 35% to 40% of a.n.a. sales.
Real estate
Under Rosen and new ownership, JCPenney is now focused on the long term, but stores will close now and then as leases come up and are evaluated, the CEO said. JCPenney still operates 15 stores in Dallas-Fort Worth.
About two-thirds of JCPenney’s stores are in malls and one-third are off-mall. As all retailers do, it will trim its portfolio now and then and this year is closing stores in Elkhart, Ind., Youngstown, Ohio, Oswego, N.Y., and Detroit Lakes, Minn.
“We have the freedom to look at our real estate portfolio and do what we need to do,” Rosen said. “But Simon and Brookfield own some of the best malls and have some of the strongest traffic.”
Simon and Brookfield have sold off dying properties, and while mall traffic bounced back as the pandemic subsided, more malls will end up being repurposed or demolished.
JCPenney still operates stores in every state and Puerto Rico, except Hawaii. Its sales of more than $8 billion last year made it bigger than Old Navy and about the size of Dillard’s.
Back in Plano
JCPenney’s local workforce of 2,640 includes 1,700 corporate staffers who have started moving into 320,000 square feet of its former headquarters on Legacy Drive.
That’s about one-sixth of the campus it built 30 years ago. The move back is expected to be completed by summer. During its bankruptcy, the retailer abandoned the workplace it was renting. It had sold it to raise money in prior hard times.
The home office workers have been temporarily located in an empty Sears store in Frisco’s Stonebriar Centre which is owned by Brookfield.
While JCPenney has seen shopper visits decline for a number of consecutive years, that metric has started to turn, Rosen said. “It’s our first proof sign.”
One positive sign: Since last late summer and fall, Penney’s shopper frequency has ticked up.
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