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Penney’s Cuts Into Catalog

NEW YORK — J.C. Penney Co. is planning major cutbacks at its catalog operation, with the loss of 2,000 jobs.<br><br>Penney’s catalog operation is the nation’s largest at about $3 billion in sales. The job cuts are primarily coming...

NEW YORK — J.C. Penney Co. is planning major cutbacks at its catalog operation, with the loss of 2,000 jobs.

Penney’s catalog operation is the nation’s largest at about $3 billion in sales. The job cuts are primarily coming from closing a catalog fulfillment center in Atlanta and two telemarketing centers in Atlanta and Lenexa, Kan.

The streamlining will result in pretax charges of approximately $40 million, or $0.10 per share, in 2003, or about $20 million in each of the first two quarters.

On the other hand, the company expects these actions to generate annual savings of about $30 million, or $0.07 per share, which will be fully realized in 2004.

While Penney’s stores and Internet business have been top industry performers, the catalog has been hampered by high costs and returns, though Penney’s said the catalog continues to make a small profit. The firm has already eliminated several specialty books and certain poor-selling merchandise, and has narrowed the mailing list, accounting for a major portion of the 20 percent catalog sales drop during the holiday season.

On the positive side, last year the division reorganized top catalog management and hired several new merchants, including Bernie Feiwus, senior vice president and associate director of catalog-Internet, who once ran Neiman Marcus Direct, and former Spiegel ceo John Irvin, a Penney Co. executive vice president and president of catalog-Internet. The team has taken steps to make the merchandise more fashionable and to improve photography and layouts, and has been testing products, including distributing a spring preview catalog to help strengthen offerings in the big book. Penney’s has also been getting involved in mailing list exchanges.

The catalog facilities involved in the latest round of cuts will close by the end of the second quarter of 2003. By that time, the company will have eliminated two catalog fulfillment centers and reallocated approximately 1.1 million square feet of fulfillment center space to the new department store support center network since January 2000. In addition, 17 outlet stores, four telemarketing centers and a fulfillment center in Milwaukee previously closed.

“Our goal is to have a substantial and profitable catalog and Internet business, with an appropriately sized infrastructure that will support current and future business needs,” Allen Questrom, chairman and chief executive officer, said in a statement. “In the last two years, catalog has made significant strides in improving its profit contribution by eliminating unprofitable sales, improving inventory management and reducing expenses.”