JCPenney Forecasts Nearly $100M in Annual IT Spend Going Forward

As analysts had predicted, JCPenney's financial results for the fiscal year that ended February 2 were dismal, with total sales and comp store sales both down 25% and online sales taking an even deeper dip, diving 33% lower than the previous year. But the retailer has also spent fiscal 2012 initiating a large-scale transformation of its IT infrastructure using Oracle Retail systems, as well as rolling out mobile POS technology that will help store associates improve customer service. The retailer's long-term strategy includes nearly $100 million per year in IT investments.

"We began the year with outdated, customized, difficult to maintain information systems, and under [CTO] Kristen Blum's leadership, we exit the year with a vision to completely overhaul our IT platform," said JCPenney CEO Ron Johnson on a February 27 conference call. "Partnering closely with Oracle, we are in the middle of a complete overhaul of our finance, merchandising, planning, allocation and store systems, so that we can compete with the most modern systems in our industry."

Financials will be the first module in the Oracle Retail systems to be implemented; CFO Ken Hannah forecasts the company will go live in a couple of months with financials, with merchandising, planning and allocation module rollouts to follow.

Johnson, who has come in for his share of criticism about the pace and direction of the changes he's instituted at the iconic company, remains strongly committed to IT's importance in the retailer's long-term revival. "Over the next three years we will complete the overhaul of our information systems and be 100% at state-of-the-art Oracle systems, and with systems from a handful of other partners that will augment that," he noted. "But the most important change is that nearly $100 million a year as we go forward will be invested in the next new thing, so we're going to stay current for years to come because of this transformation we're going through."

The mobility rollout that's under way is the most visible IT initiative at the beleaguered department store retailer. "Within one month, every employee on the floor of a JCPenney store will carry an iPod and be able to check out customers in time and anywhere in the store," said Johnson. "Last week 25% of all transactions were conducted on a mobile device. In this quarter we will start to see product information, training and all of our employee support systems [provided] directly to employees through our in-store WiFi networks on these iPods."

Johnson believes the mobile technology will have a direct and positive experience on customer service. "My goal is to start to add more employees on the floor to serve a customer," he said in response to a query about cost-cutting. "That's why we've moved to mobile POS, so we can untether that employee from the cash wrap and let them meet the customer while they shop and check out anywhere and anytime. Ultimately our employees on the floor are the heartbeat of the transformation."

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