Can a struggling J.C. Penney regain some ground in the coming weeks?
It’s been a tough reinvention so far for the Plano, Tex.-based department store chain, which on Tuesday cut another 350 workers from its headquarters, but will revise its pricing program and begin to open new in-store shops next month. These moves reflect the first part of an ambitious plan through 2014 to convert Penney’s wide-open selling floors to a format featuring 100 shops-in-shop, more or less. They’re also an attempt to get a lift on back-to-school business and stem the negative sales trends.
Penney’s put a positive spin on Tuesday’s cutback, saying it marks the end of this year’s streamlining, so workers who remain on the team can focus on their jobs rather than keep looking over their shoulders to see if they still have jobs.
“We have simplified processes, removed unnecessary work and reduced layers to help us make better and faster decisions,” Ron Johnson, J.C. Penney Co. Inc.’s chairman and chief executive officer, said Tuesday during an interview. “While difficult, these decisions are in the long-term interests of J.C. Penney and our stakeholders.” RELATED STORY: Ron Johnson to Rejig J.C. Penney's Marketing >>
The company, he noted, is making good on its commitment to lower its expense rate by $900 million, which was helped by this week’s cuts. The goal is now expected to be reached by the end of this year, which would be a year ahead of the initial schedule.
Johnson also told WWD that while there’s been downsizing in Plano, there’s a buildup occurring at Penney’s new offices at 200 Lafayette Street in the SoHo section of Manhattan. The site houses design talent and staff involved in, among other areas, the Martha Stewart partnership.
On Aug. 1, Penney’s officially unveils the first round of new concept shops, which will be for Levi’s, Arizona and iJeans by Buffalo. On Sept. 1, in-store shops for Liz Claiborne, Izod and JCP, a new in-house brand for higher-quality basics for men’s, women and children, will also be unveiled. These shops will all open at 700 of Penney’s largest stores, and could open in additional sites later on.
Other new offerings for fall include accessories from Betseyville by Betsey Johnson, Lulu Guinness and Vivienne Tam, girls fashions from Dream Pop by Cynthia Rowley, and Royal Velvet furniture, window treatments and tabletop.
By the time fall goods hit in August, the department store chain will have switched out 47 percent of its prior assortment.
Based on all those merchandise changes, the company has forecast better sales in the second half, after being down 18.9 percent on a comparable-store sales basis in the first quarter, though officials don’t say how much better they envision sales to be.
Next year, styles from Marchesa’s Georgina Chapman as well as William Rast will be added, along with Watchgear by Tourneau and the Martha Stewart shop, which will anchor the home department.
Other additions coming up: Happy Chic by Jonathan Adler; a collection of products by Michael Graves, who previously had a collection at Target; a Design by Conran line of furniture, decorative home and lighting by British designer Terence Conran, and a line from Bodum, the Danish kitchen goods producer.
For Johnson, a top priority is to fine-tune the chain’s three-tiered pricing strategy, which has confused many shoppers. Tweaking will be apparent in August, but so far Penney’s has been mum on what will transpire.
Johnson told WWD that the goal is “to communicate the benefits of our new pricing structure to our customers.” He said the pricing message needs to be simplified. Penney’s pricing scheme involves everyday low prices, monthly values and clearances every other Friday that could run for a few days. Formerly, Penney’s notoriously played the “high-low” pricing game and was highly promotional.
But Penney’s pricing became even more confusing this month, when the company introduced new marked-down items every Friday, instead of the first and third Fridays, as it had been doing all year. Penney’s always has clearance items in the store and only this year introduced Fridays as the starting point for fresh clearance items. Officials also noted that July is a clearance month throughout the industry, suggesting that the pickup on markdowns was warranted.
During the interview, Johnson stressed that the company has not been reversing its pricing or business strategy, and insisted that recent media reports that Penney’s was adding sales or reverting back to coupons have been inaccurate. “We will not be bringing coupons back and not bringing sales back,” Johnson said. “There will be no change in the business strategy. We believe the transformation is on track.”
Johnson also assured that Tuesday’s cutbacks — hitting finance, information technology, product development and sourcing departments the hardest — marks “the final phase of our home-office reorganization. We are confident that we have completed our reorganization for the transformation of J.C. Penney.”
There will be 3,100 team members employed at the Plano home office after Tuesday’s cutbacks, down from 4,000 at the beginning of the year. The $16.5 billion Penney’s was long believed to have a home-office team that was outsized considering the size of the company and compared to some competitors. The head count has been as high as 5,900 in recent history, according to reports.
Johnson said the downsized organization would align better with the company’s reinvention, make the company more competitive and further reduce costs. “It’s a smaller team for a simpler business model,” Johnson said.
“It’s been a very challenging and emotional period and very disconcerting for our workers,” Johnson said. “The good news is that people here can now put their heads down and go back to work. We’re done for this year. There will be no more structural changes this year.”
While cutbacks usually go over well on Wall Street, that wasn’t the case with Penney’s on Tuesday when the stock dropped 5.76 percent, or $1.27, to $20.76. Over the past 52 weeks, the stock has declined 31 percent.
Breaking News: @louisvuitton's men's artistic director @mrkimjones is leaving the French fashion house after nearly 7 years. Jones joined Louis Vuitton in 2011, following a three year tenure as creative director of British luxury goods brand Alfred Dunhill. Jones is to exit Louis Vuitton after showing his fall 2018 collection for the brand in Paris on Thursday. Read the full exclusive story on WWD.com. Link in bio. #wwdnews #wwdfashion
For men’s fall 2018, @giuseppezanotti drew on elements from streetwear, sport, biker, combat and rock ‘n’ roll. Pictured here are a pair of shoes from the collection, featuring zippers, rhinestones, and silver hardware. Head to WWD.com to see a roundup of the accessories from Milan’s men’s fall 2018 shows. #wwdfashion (📷: Andrea Delb)
To celebrate the 25th anniversary of @ralphlauren’s snowboarding collection, the brand is mining its archives. The iconic brand is reintroducing vintage styles and dropping new designs for a color capsule that will be available in Ralph Lauren stores and @openingceremony on January 25. The capsule will consist of 10 pieces, including the Snow Beach Pullover, pictured here, which is a collector’s item that rapper Raekwon wore in Wu-Tang Clan’s “Can It Be All So Simple” video. #wwdfashion (📷: Tom Gould)
For @rochasofficial’s pre-fall 2018 collection, creative director Alessandro Dell’Acqua channeled the sophisticated and intriguing Catherine Denevue in the film “Belle de Jour.” Polished collarless coats, midi skirts, suits and ’60s graphic motifs were all featured in the collection, adding a sense of discreet luxury. See the rest of the photos on WWD.com #wwdfashion
“We tried to produce clothing of that couture quality, but the most daunting part was that we only had a matter of days [to do it],” said costume designer Lou Eyrich, who recreated Gianni Versace’s iconic looks for @americancrimestoryfx. Eyrich searched online retailers and vintage shops for original pieces from the design house and for @penelopecruzoficial, who plays Donatella Versace. Head to WWD.com to read how she created the Versace world. #wwdfashion
Only three months after her stellar debut catwalk season, @kaiagerber has inked her first big design collaboration –– with @karllagerfeld. The collection blends Lagerfeld’s Parisian chic aesthetic and the model’s signature West Coast casual style via RTW, accessories, footwear and more. The #KarlLagerfeldxKaia collection will launch in September with a series of events. Get all the details on WWD.com. #wwdnews #wwdfashion
Harrods plans to remove the famous statue of Princess Diana and Dodi Al Fayed from the bottom of the Egyptian escalators and hand it back to Mohamed Al-Fayed. “We are very proud to have played our role in celebrating the lives of Diana, Princess of Wales and Dodi Al Fayed at Harrods and to have welcomed people from around the world to visit the memorial for the past 20 years,” said Michael Ward, Harrods managing director. “With the announcement of the new official memorial statue to Diana, Princess of Wales at Kensington Palace, we feel that the time is right to return this memorial to Mr. Al Fayed and for the public to be invited to pay their respects at the palace.” More on the news, with reporting by @loreleimarfil, at WWD.com. #wwdnews