PLANO, Tex. — J.C. Penney Co. Inc. shareholders approved a nonbinding resolution to clamp down on the severance agreements of executives and make them subject to shareholder approval.
The move at the annual meeting here on Friday came after Penney's was said to have paid about $10 million in severance to former chief operating officer Catherine West, who departed in December after just six months.
The proposal from a labor union was opposed by chairman and chief executive officer Myron E. "Mike" Ullman 3rd and the board. It would require shareholder approval of severance agreements of more than 2.99 times an executive's base salary and bonus.
West was president of Capital One's U.S. Card business before joining Penney's, and her appointment was seen as being instrumental in Penney's establishing closer ties to customers.
The vote came as Ullman told about 200 shareholders at company headquarters that Penney's is focusing on an aggressive plan to reach midtier retail dominance by speeding fashion to stores and making an emotional connection with shoppers. The 2007 to 2011 strategy includes opening at least 250 stores, refining customer service, inspiring sales associates to better engage customers and building Penney's Web business.
Next year's opening of Penney's first Manhattan store, a 150,000-square-foot unit at Manhattan Mall near rival Macy's Herald Square flagship, "will allow us to make a huge statement to our target customers and give us a platform to showcase the best from all our brands," Ullman said.
Ullman again touted the accomplishments of the 1,033-unit chain, saying Penney's already has exceeded many of its long-term strategic goals, including beating the 2007 sales plan with a 6 percent overall gain, bettering the 2008 income plan, reaching $1.9 billion, and exceeding the 2009 profitability target at 9.7 percent.
"We want to be the preferred shopping choice for middle America," he said.
Ullman said Penney's Web site volume rose to $1.3 billion, a 24.4 percent increase. He cited the continuing rollout of Sephora in-store beauty boutiques and the successful launch of exclusive brands, including a.n.a., East 5th and Studio, a home collection, with the trio generating a combined $500 million in first-year volume for the $19.9 billion chain.Ullman said the new "Every Day Matters" ad campaign that accents service and affordable fashion is making an emotional connection with consumers.
Penney's has high expectations for its new American Living multicategory brand being created by Polo Ralph Lauren's Global Brand Concepts that will hit stores in January. It will be the biggest launch in the company's history.
The chain opened 28 stores last year, a milestone, and Ullman said there are at least 400 additional locations in target suburbs across the U.S. for new stores, with plans to open at least 250 units in the next five years. The building initiative is part of a $3 billion capital campaign that Penney's launched last year.
A question-and-answer session with shareholders became heated when a member of People for the Ethical Treatment of Animals addressed Ullman and the board, asking for a stronger commitment to refrain from selling furs at Penney's after reading a lengthy statement condemning the killing of animals. Ullman reminded the PETA member that Penney's already has a policy never to sell furs and has no plans to start.
Penney's reported on Thursday that first-quarter profits jumped 13.3 percent as department store sales gained 4.4 percent. The company said gains were propelled by its exclusive fashion merchandise. The results beat analysts' expectations by 1 cent. In addition, the retailer increased earnings guidance for the year, raising estimates to $5.49 a share from $5.44.
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