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NEW YORK — Last December, it looked bleak for Ken Mangone and the private brand business at J.C. Penney Co. Inc. he was instrumental in bolstering.
Revenues were shrinking and Mangone, the executive vice president of product development, design and sourcing, left Penney’s under cloudy circumstances over the future of such homegrown power labels as Worthington and St. John’s Bay. They were being downsized and dissolved into other labels by order of then-chief executive officer Ron Johnson.
Four months later, the board fired Johnson, amid the company’s disintegrating finances; Myron “Mike” Ullman 3rd returned for his second stint as Penney’s ceo, and Mangone was asked to come back as well. Like Ullman, he agreed without hesitation.
“For me, it was a no-brainer,” Mangone told WWD. “I spent the better part of 35 years at J.C. Penney. I care about the people. I care about the company. We have great people that can drive the business. I make sure we have the right people in place and that they have the tools to be successful.” He declined to discuss why he left Penney’s in December.
On Thursday, Mangone got just the apparatus he was looking for, as Penney’s quietly opened an apparel design center at 200 Lafayette Street here. The center, on the site of a former factory with exposed brick walls, arched windows, lots of light and landmark status, is a sign that the struggling Penney’s, in its turnaround bid, is taking a page from the past to reestablish its private brand reputation. It’s been a competitive differentiator, a vehicle for price promoting and couponing, and the heart and soul of the offering.
According to the company’s Form 10-K, private and exclusive brands found only at Penney’s represented about 53 percent of the retailer’s merchandise in 2012, compared with 55 percent in 2011. The figure would have fallen further in 2013, considering Johnson’s strategy. At the peak, a couple of the private brands surpassed $1 billion in revenues, though only Arizona is still in that range. Johnson scaled several labels down, and eliminated St. John’s Bay women’s entirely. “Customers were really surprised when we discontinued St. John’s Bay women’s,” Mangone said. “They missed it and protested that it was gone. But it came back in early March.” St. John’s Bay men’s was minimalized under Johnson but is also being revived.
“Customers see four or five of our private brands as national brands,” Mangone said, citing Worthington, Arizona, Stafford and jcp home. He also said Liz Claiborne, which J.C. Penney owns, “is still the most recognized apparel brand in the country.”
It may not take that long for private brands to come back full force, and back-to-school, when Penney’s is expected to come roaring back with private brand promotions, will be a big test. B-t-s affects all consumers and categories, not just those in school, and is a storewide phenomenon. Penney’s still has a solid infrastructure for sourcing, suppliers and logistics, and partnerships with manufacturers that appear to be sticking by Penney’s despite its troubles. In recent years, the retailer has reduced the cycle time from product development to delivery in the stores. The added talent being brought on board at 200 Lafayette, 100 individuals, will help. “It’s definitely a strategic advantage if you manage that matrix,” Mangone observed.
Within the four-level, 40,000-square-foot space at 200 Lafayette, there are designers; technical designers; CAD operators; trend teams; fabric teams; color and print quality control specialists, and a print and fabric archive. An on-site showroom for Penney’s merchants who come up from the Plano, Tex., headquarters near Dallas to shop the private brands, is being created. The headquarters still houses two-thirds of the private brand development team, and Mangone, who joined Penney’s in 1977 and advanced through a variety of roles in stores, the buying organization and product development, remains based there.
While some may think having two sites for private brand development is unnecessary, Mangone said it enables Penney’s to pull from a wider talent pool and gives people lifestyle options about working in Texas or New York. Over the past several years, Sears Holdings Corp., Kohl’s Corp., Gap Inc. and other specialty chains have established apparel design facilities here. Macy’s Merchandising is based in New York, and Wal-Mart Stores Inc. had an apparel operation, but shut it down after it failed to meet expectations.
Penney’s notion of a Manhattan design center arose when the company bought Liz Claiborne in 2011. The company already owned the exclusive rights to distribute Liz Claiborne. After the transaction, Penney’s started subleasing space from Claiborne. Later, temporary quarters for private brand development were opened because construction on the Lafayette Street site got delayed due to Hurricane Sandy.
The process of product development starts with trend people who look at macro-consumer trends, and trends in fashion, color and silhouettes. They travel around the world, for example, visiting Amsterdam, Copenhagen and Tokyo for denim discoveries that could be applied to Arizona. Paris has been a source for inspiration for Worthington and its workwear looks, and for Claiborne, Mangone noted that the staff often pulls from the archives. For a chain with a largely middle American appeal, Mangone said Penney’s also gets some urban inspirations from New York and Los Angeles. Trend personnel work with Penney’s designers who already have brand filters guiding the look and attitude and the marketing and packaging of each label.
In women’s apparel, it’s generally a 35-week cycle time, from concept to in-store deliveries. Six years ago, it was a 50-plus-week cycle time, Mangone noted. “From concept to delivery, we are at least competitive and in some cases faster. In women’s, we are delivering [new products] every month.”
With certain exclusive labels like Giggle for kids, Giggle designs the product, while Penney’s sources and manufactures it. The same is true with Nicole by Nicole Miller. On the other hand, Olsenboye and Joe Fresh both design and source their Penney’s collections.
Asked if any new private labels will soon be introduced, Mangone said nothing is currently cooking. “There will always be white space which we review with our merchants,” he said. “But right now the focus is to get the key core heritage brands back to the level they were. That’s what I told my teams.”