Photo: J.C. Penney
Has J.C. Penney figured out a fix for its fashion problem?
Same-store sales at J.C. Penney have declined for four of the past five quarters and weakness in the chain’s clothing sales has been a consistent drag on performance. While Marvin Ellison, Penney’s CEO, doesn’t expect the chain will move its business into positive comps quickly, he did cite reasons for optimism on an earnings call with analysts last week.
On the call, Mr. Ellison said he was pleased with the chain’s sales of active apparel and dresses. “Improvements in these apparel categories bode well for the balance of 2017, as these items become a much larger piece of our business moving forward,” he said.
Mr. Ellison said that although men’s, women’s and kid’s apparel performed below the overall comp for the company in the last quarter, Penney did see sales tick up in March and April compared to February. Women’s apparel, he said, “delivered the best comp trend improvement from Q4 of last year to Q1.”
“Broadly speaking, we’re pleased that our new apparel strategy, highlighting inspiring trends at a value, performed well in the casual and contemporary categories of women,” said Mr. Ellison. Many new items in these categories launched in the spring had already sold out, he added.
Mr. Ellison said the chain was now challenged to build on its recent successes in women’s apparel and extend it to kid’s and men’s clothing, as well. Activewear is a segment in which Penney is looking for growth across the board. He cited an enhanced partnership selling Nike apparel and footwear in 600 stores as well as plans to have Adidas in over 400 stores for back-to-school.
John Tighe, Penney’s chief merchant, said the chain is becoming “more nimble” in the apparel category.
“Last year, we reorganized our whole process for product development and design, and in some areas, reduced it by over 40 percent from where we were,” he said. “This is allowing us to be much faster to market and be more trend-right and allowing us to really deliver the right trend and value at the timely basis.”
- J. C. Penney (JCP) Q1 2017 Results (Earnings Call Transcript) – Seeking Alpha
- J.C. Penney Is Having a Serious Wardrobe Malfunction – Bloomberg
- J.C. Penney shares take a beating, closing at historic low, after sales miss – The Dallas Morning News
- Has J.C. Penney pulled of ‘one of the greatest financial turnarounds in retail history’? – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Is J.C. Penney on the right track to turn its apparel business around? What else could management do to move the category into an area of strength for the chain?
Poll
BrainTrust
Mark Ryski
Founder, CEO & Author, HeadCount Corporation
Lee Peterson
EVP Thought Leadership, Marketing, WD Partners
Apparel is a very tough category and while J.C. Penney is making marginal gains, I predict the category will continue to be a drag on comps. Adding Nike and Adidas seem like safe “me-too” plays that will have only a modest impact. If management is looking for a more meaningful/sustainable improvement in apparel, I think a stronger push into exclusive lines a la Target is a better way to go.
Agreed Mark, expecting growth in active-wear apparel is a total “me-too” move akin to the strategy that Kohl’s CEO Kevin Mansell recently revealed and where Dick’s Sporting Goods does a better and more focused job. Also the talk of being more nimble, faster to market and trend-right sounds like they have a worse case of denial than Eddie Lampert over at Sears Holdings. J.C. Penney has no reason to believe that they can be more nimble than the fast-fashion leaders — Zara, H&M, etc. — and there is no way they can credibly compete on this strategy in their apparel lines. Sephora is the only thing keeping this boat afloat and with the rapid planned expansion of stand-alone beauty retailers like Ulta and store-within-a-store concepts at other department stores, I’m not sure how long it will be able to prop them and their failed strategies up.
Overall I see many changes that J.C. Penney has made — they are doing it right. Having Sephora cosmetic stores inside their stores and bringing back appliances are two moves I feel are good for J.C. Penney. However with apparel I feel that what J.C. Penney lacks is not yet giving the customer a good reason to shop them versus Kohl’s. Their apparel has virtually no customer service and for a department store that’s important. In Macy’s I could buy clothes myself without ever seeing an associate. However, if I choose, they have associates to help pick out merchandise, find what I may need and also provide alterations when needed, such as when I am buying a suit. I think this is important.
If J.C. Penney wants to reinvent themselves as a department store by bringing back traditional department store items like appliances, they also need to bring back traditional department store service.
Ok, here’s the deal. If you have kids, ask them where they want to go to buy apparel. If you work with people in their 20s or 30s, ask them where they go to buy apparel. Ask your wife, her friends, women you work with. Ask anyone. J.C. Penney? Are you kidding? For unaided awareness to purchase (especially in apparel), they have to get the lowest score in any given mall.
So why go to J.C. Penney? Oh yeah, Sephora. But other than that, once Baby Boomers stop going there to buy amazingly funky clothes, who does that leave as a customer base? People under 40? No way. Let’s face it, this is a dying brand and, without Sephora, about two notches below Macy’s. We are witnessing a slow death spiral equaled only by Sears and K-Mart. Don’t believe the turn around hype, that’s all about getting Sephora more space.
Lee, I took your advice and asked my expert shopper her opinion. It coincided with your comments. She said there was no reason for her to shop at J.C. Penney because there is nothing there that appeals to her sense of fashion (which, I might add, is pretty good). Sephora would not be enough of a draw for her to go there. When it came to deciding where to go between J.C. Penney, Kmart and Sears her choice was none of the above. Not exactly scientific, but it begins to make your point.
Agree with both Lee and Ed on this one. This goes back to a previous discussion a few weeks ago about Sephora and J.C. Penney. Customers may be shopping at Sephora, but they are not turning around and buying apparel at Penney’s. They are leaving the store, entering the mall, and buying apparel elsewhere. This comes down to having merchandise people want to buy. Fast fashion brands have it, Penney’s doesn’t.
I give J.C. Penney credit for turning the boat around after the disaster that was Ron Johnson. But if they want to make more long-term changes that resonate and engage, then they need to bring in more women in the top positions.
Men in a leadership position of a predominantly female-focused fashion chain is not going to cut it in this day and age. They need a change at the top.
A woman was the head merchant until last year. Now it’s a man. Not sure the gender is relevant, since he seems to be doing a better job even in the women’s area (see my comment below).
You don’t think gender is relevant? How can a man make decisions about what women find engaging? Marvin Ellison fired a woman and replaced her with a man. Not sure the “fashion” part of JCP has been elevated as that is what this discussion is about. Same store sales are declining in fashion since removing a woman.
Home Shopping Network became a fashion powerhouse online and on TV when they changed all of the main decision makers to women. Their target market is women. So men making decisions for women’s fashion never works. If you need proof, try buying your wife a dress.
J.C. Penney is doomed. It is doomed because the consumer J.C. Penney targets has radically changed while J.C. Penney hasn’t. In fact, J.C. Penney has doubled down on being a “department store” which is now an irrelevant business model.
Apparel is a tactic. The relationship with apparel has changed for those women who are entering their family formation years. J.C. Penney just learned that women are more casual. That seems to be a blinding flash of the obvious, and proof that J.C. Penney continues to justify a “department store” assortment versus creating a shopping experience that is relevant to digital natives that are now entering the key life stages of family formation and home ownership.
Ron Johnson right-sized revenues for J.C. Penney and yet it continues to de-comp. Like the other mall anchors, it needs to redefine what J.C. Penney means to women who grew up during a time of austerity and no longer live a departmentalized life.
J.C. Penney can’t continue to fill the box. It must redefine the box as well as what the customer will permit them to put into it and then eliminate the friction of shopping. And that is why J.C. Penney is doomed.
I’ve been critical for several years of J.C. Penney’s women’s assortments — too many brands, too many styles, too much overlap between brands. But to give credit where it’s due: I shopped a J.C. Penney store in the past couple of weeks on behalf of a consulting client and I saw a marked improvement in key item focus and brand clarity. Shoes were merchandised in a more effective way and fashion jewelry looked improved too (although not yet handbags).
J.C. Penney promoted its men’s GMM last year to the head merchant position and, if what I saw is any indication, he’s got things heading in the right direction. It’s a small sample size but perhaps a leading indicator. J.C. Penney isn’t going to solve its sales problems until it figures out how to drive its apparel business, no matter how well it’s doing with Sephora or even major appliances.
Lee said it perfectly — thanks for speaking the brutal truth Lee, we need more of that right now.
My first thought is that it’s meaningless these days to talk about “same store sales” (and, indeed, positive comps may never happen). My second thought is that JCP has a rather narrow window in which to experiment. Its strength was always basic clothes at “good” prices, at just as it learned — the hard way — about messing with the price part of the equation, it needs to pay attention to the “basic” part as well. Still, generic clothing would seem to be what is most affected by off-price retail, so remaining static isn’t the best solution.
In short, Mr. Ellsion needs to guess correctly about what people want … but I’m reluctant to call that a strategy.
J.C. Penney is on track to becoming the next department store to follow Sears into oblivion. We previously talked about Sephora’s impact on Penney’s, but that clearly isn’t converting into apparel sales. Claiming that activewear is where you’ll bet the future seems more like hope than a strategy.
It’s clear that J.C.Penney has lost sight of who their customer is, and their customers have left them for other brands. Anyone around me I ask where they buy apparel, none will mention Penney’s. If you ask them why, the usual response is “They don’t have any styles I like.” That tells me they need to look at fundamentals in retail. Focus on having the right product. Then deliver it with great service. Those are two things J.C. Penney isn’t doing yet that they need for a turnaround.
I mostly agree with the comments that indicate that the issue with J.C. Penney is the brand J.C. Penney. I would advise them to continue to bring in the brands and stores-within-stores as they have done with Sephora and, at least for the foreseeable future, push brands to the front and Penney to the back. Nike at J.C. Penney, Sephora at J.C. Penney, etc. Until J.C. Penney has proven itself to deliver a good enough shopping experience via the brand selection and improvement of service. Then someday they can push their brands up a bit. It’s a long road and all department stores face big challenges BUT have some good assets in their stores. Leverage what you’ve got …