Penney Chief Wants To Win Hearts, Minds and Wallets of Middle Class

Discussion
Apr 20, 2005
George Anderson

By George Anderson


In a meeting with Wall Street analysts, J.C. Penney chairman and chief executive Myron “Mike” Ullman said the retail chain is looking “to win the hearts and minds of middle-income consumers.”


Calling the present period one of unique opportunity, Mr. Ullman said the combination of “the turmoil in the industry” along with Penney’s product and merchandising strategy position the company for a period of dramatic growth.


As for the turmoil Mr. Ullman spoke about, he indicated he was not terribly concerned about competition from the newly combined Sears and Kmart. According to Penney’s chief, it will probably take Sears Holdings years “trying to figure out how to execute whatever they’re planning to be.” Once it does, he said, it is very likely that it will be more of a discounter than department store.


The turmoil also offers opportunities for growth through new locations. Penney’s focus on off-mall locations has been a success, say company executives.


Penney’s president, Ken Hicks, said the company has increased its gross sales per square foot by $15 or 11 percent to $150 since 2001.


Mr. Hicks gives credit to Penney’s success for the chain’s ability to develop its own branded clothes that meet the fashion needs of its core shopper — women between the ages of 35 and 54 with household incomes between $35,000 and $85,000.


Recent rollouts of new lines such as nicole by Nicole Miller and W Work To Weekend have been well received.


Moderator’s Comment: What is your assessment of the opportunities currently in front of J.C. Penney due to the competitive environment and its own actions?
What challenges will it need to overcome if it is going to achieve the dramatic growth predicted by its chairman and CEO?


J.C. Penney’s message was very upbeat and it does have some wind in its “sales” at the moment. We have to admit being a bit concerned when we read the following
quote attributed to Mike Ullman. “One has to assume that this $10 billion apparel business out there, that we deserve more than our fair share of those customers.”


To Mr. Ullman, we would offer the following caution. Remember what they say about people who ass-u-me.
George Anderson – Moderator

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5 Comments on "Penney Chief Wants To Win Hearts, Minds and Wallets of Middle Class"


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Karen Kingsley
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Karen Kingsley
15 years 10 months ago

Penney’s has a tough slog in front of them. However, is it possible for them to fare well? Sure, why not?

However, they need to find a way to combine the cleanliness, service, product mix of a Kohl’s with the trendiness, serendipity and fashion edge of a Target.

And they need to do it just at a time when the competition is working even harder to do the same thing themselves. W and Nicole are a step in the right direction – although I’m not convinced the Nicole Miller line carries equity with the Penney customer.

So if the questions is: can they? Sure. I will not be buying stock just yet, however.

Carol Spieckerman
Guest
15 years 10 months ago

In my opinion, Mr. Ullman’s assumption isn’t far off, particularly in light of the consolidation action we’re all watching. Penney’s was doing quite well with their turn-around BEFORE the Kmart/Sears merger and Federated’s acquisition of May (and resulting “Macy-fication”). Now, they practically own the middle. Beyond the bricks, their clicks have been hot as well with lots of room to grow. Penney’s has laid an excellent foundation through strategic brand development and acquisition in all departments and can look forward to making real headway in the years to come.

Richard Ray
Guest
Richard Ray
15 years 10 months ago

I agree with the panelist who says a plan is one thing and executing that plan is another. Penney must execute their plan better than competition.

They have several elements working in their favor… including the Penney Catalog and JCPenney.com, where they are years ahead of others on the back end logistics of moving the merchandise to the customer.

The buying organization is much more streamlined than the Macy’s-Federated multi-level “who’s in charge” bureaucracy. This affords faster decision making and having the latest fashions in the stores first.

The stores are bright, clean and shopable, with fast checkout getting better and better.

Don Delzell
Guest
Don Delzell
15 years 10 months ago
Mike Ullman’s four point strategy is textbook appropriate. Of course, formulating a strategy is relatively easy when compared to implementing it effectively. Penney absolutely (along with Kohl’s) is in an extraordinary position to benefit from the expected opportunity created by the Federated-May merger. Converting May stores to Macy’s will inevitably leave a void in the moderate to lower moderate department store niche. The combination of lifestyle advertising, powerful assortments and improved store appearance should combine to give Penney a competitive advantage in capturing the customer “orphaned” by the May conversions. I would caution Mike Ullman, however, to avoid the all too common error of hubris. Counting on the ineptitude of the Kmart-Sears combination is not humble management. Earning the loyalty of the consumer starts with humility. She chooses her stores, and can and will easily choose to shift loyalty. And she doesn’t do it because someone else is incompetent. Let’s give Mr. Ullman an opportunity to demonstrate that he can execute the ambitious strategy outlined. And in the meantime, let’s hope someone in his PR… Read more »
Jim Okamura
Guest
Jim Okamura
15 years 9 months ago
We have been very bullish on JCP’s outlook, and market conditions are only helping their cause. I agree on the points made earlier that most of this comes down to execution, as the strategy is quite simple. One favorable market trend that bodes well for them is the continued spending on Home-related products, where Penney’s is a dominant force. While there are signs that the hot housing market may cool down, consumers continue to shift the wallet-spend into home decor, bedding and kitchen products. Penney’s stands to gain a lot from this market growth, if they can even maintain their large market share. However, there is risk that they take this for granted, as arguably they could be considered over-developed in Home goods when you look at the percentage of their total sales coming from this business. It also means that they should be looking at other competitors such as Target and Lowe’s for their growing Home business. We believe that the Home business can be a big growth driver, beyond that of their apparel… Read more »
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