To Bring Back Customers, JCP Brings Back Private Brands

Despite a continuing decline in comp store sales, foot traffic and conversions, newly reinstated CEO Myron Ullman said J. C. Penney has strong "fundamental business processes" and is focused on luring customers back by restocking the core private brands that accounted for much of the ailing retailer’s success in the past and building a competitive e-commerce platform.

Speaking on a recent call with analysts, Ullman said that in the past 18 months, JCP has concentrated on adding new brands at the expense of its bread-and-butter private labels. "We diminished several of the key brands during this phase and we lost a lot of traffic. Our traditional private brands have been the core of our business. These brands have been underemphasized over the last year or so," he said. "We’re bringing back a number of the brands that customers value, and she has told us loud and clear she intends to reach [for them] when they’re in the store."

Chief among those private labels — which are the most promotional but most profitable, accounting for JCP’s highest sales productivity — is the billion-dollar St. John’s Bay apparel brand. Arizona and Liz Claiborne, exclusive to JCP, will return to stores as well.

Numbers are down, but prognosis is up
For Q1 2013, foot traffic dropped 6 percent year-over-year, and comp store sales plunged 16.6 percent. Conversion in stores slipped 1 percent, while the average transaction value slid 10 percent, partly due to sales offered on top of everyday low prices plus a greater selection of clearance items, Ullman added.

The retailer is starting to see improvements in inventory. Despite a first-quarter 9 percent drop compared to the same period in 2012, merchandise inventory improved by $457 million compared to Q4 2012. "The increase from year-end reflects investments in home and women’s apparel associated with the introduction of our new attractions, as well as additional inventory investment in our merchandising assortment," said Ullman.

New attractions add balance
Although many of former CEO Ron Johnson’s efforts and ideas have been widely panned, Ullman said the shop-in-shop format, which he refers to as "attractions," will remain a "strategic focus," given the "encouraging performance" of the Levi’s, IZOD, Liz Claiborne, Arizona and JCP branded boutiques. "These [attractions] are ideas and aspirational products that make the shopping experience more balanced in terms of what [the customer] might be looking for, and it stimulates increased business and increased spend," he explained. "We probably have some aspirations that other stores (where she may have been shopping while she was gone [from us]) don’t have."

Aiming for omnichannel
Like most retailers, JCP recognizes the need to invest in e-commerce, with Ullman expressing a renewed focus on making " a stronger component of our business once again." Letting its online operations languish was "an organizational mistake," he said.

"Over the last year functioned as a completely separate entity inside the company with little synergy between stores and online," he said. "We need to create a seamless, omnichannel experience, with strong store and digital convergence."

JCP is working toward improving its online assortment and aligning inventories, Ullman said, so that a sales associate who needs an extended size for a product offered in store can find the same merchandise, with an expanded selection, offered on 

"Clearly we gave up a lot of Internet business, which we’re happy to take back," he added.

Courting core customers
JCP notably issued something of a mea culpa in recent television and online ads. The retailer is shifting its messaging platform to revolve around targeted times of year when shoppers are most interested in opening their wallets. "We can focus our spending on the times that customers expect to be shopping, probably about over 20 times that we’ve identified, [when] the customer really expects to be in the marketplace," explained Ullman. 

JCP unveiled the first such advertising push for Mother’s Day, and the CEO said the results have been encouraging so far.  "We have measured very carefully the traffic in the stores as well as the purchase conversion," Ullman added. "I think our television spot, particularly the first one, is very well received, and I think it was the number-one social media conversation for several days."

The retailer expects to be in fighting form for the important back-to-school shopping period. Because JCP maintains a strong position in the kids’, young men’s and juniors’ apparel business, "the back-to-school period is probably the best target, because it’s a seven-week span and I would expect us to be ready to compete across the board with very few exceptions," Ullman said.

Revisiting rewards
After listening closely to shopper sentiment, JCP responded by switching its rewards program from a one-level offering back to customers’ favored tiered approach. "Our customers clearly told us they appreciate being rewarded for the frequency and [basket] size they are purchasing," explained Ullman.