By  on May 19, 2008

PLANO, Tex. — Myron E. "Mike" Ullman 3rd, chairman and chief executive officer of J.C. Penney Co. Inc., told shareholders Friday the retailer was positioned to cope with the economic downturn — a day after Penney's reported first-quarter net profits fell 49.6 percent to $120 million.

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"We had the second-best year in our company history in 2007 despite the challenging economic environment, and we are looking ahead to navigate the choppy waters with a proactive plan to continue gaining market share and reaching more consumers," Ullman said at the annual meeting.

Penney's plans to continue rolling out Sephora units in many of its new and renovated stores, Ullman said, without providing specifics. There are 72 in-store shops generating sales as much as two-and-a-half times stronger than merchandise previously sold in the footprint taken up by Sephora, he added.

Ullman described the $1.5 billion Web site,, which grew 15 percent in April, as the hub of Penney's business.

He said the 1,074-unit chain is in a niche between Macy's and Target, allowing Penney's to reach both midtier fashion shoppers as well as those interested in more commodity-priced merchandise.

"We are financially sound and have as much flexibility as any time in the company's history," Ullman said. He was referring to the $19.9 billion retailer's cash reserves of almost $2 billion and savings of about $200 million in capital expenditures by scaling back store openings this year to 36 from 50 and planning 20 major store renovations, down from 65.

Ullman said Penney's could leverage its financial flexibility to cushion itself and be ready to expand again when the economy improves.

However, with a recovery possibly a few years away, Penney's is implementing a pragmatic agenda called the Bridge Plan, which Ullman said is focused on balancing the chain's long-term opportunities with near-term pressures on the consumer, including the housing slowdown, rising gas and food prices, tight credit and job cuts.

The company has said it would cut future orders to align inventory with anticipated sales. Penney's also is launching initiatives, such as the Decree and Kimora Lee Simmons' Fabulosity junior lines, and a program to boost customer service. The chain's merchandise mix is now about 45 percent private brands and the rest a mix of exclusive and national brands.

Ullman said the higher priced American Living fashion and lifestyle collection, which is produced by Polo Ralph Lauren Corp.'s Global Brand Concepts, could reach sales of $1 billion in three to four years.

Over the past year, Penney's has hired 160 in-house designers to help ramp-up trend offerings and speed them to the stores more quickly.

Ullman has said Penney's women's apparel, representing more than half the store's offerings, has been a relatively robust part of the business. "We want to be more articulate about the prices, the fashion and the private and exclusive brand advantages that Penney's has to offer," Ullman said of Penney's advertising and marketing campaigns that play up synergies among its store, catalogue and Internet businesses.

The retailer's board also declared a quarterly dividend of 20 cents per share on the chain's common stock payable Aug. 1, to company stockholders of record at the close of business on July 10.  

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