PLANO, Tex. — J.C. Penney Co. wants to win the middle.
At the retailer’s annual general meeting here, Myron E. Ullman 3rd, chairman and chief executive officer of the $18.7 billion chain, said Penney’s five-year growth plan is on course to make it the preferred shopping choice of middle America and middle-aged consumers.
“It’s quite a departure from your mother’s J.C. Penney,” he said Friday. “Our long-range plan is designed to make J.C. Penney Co. a leader in the retail industry, and our excellent performance in the first year of this plan underscores that we are well on our way.”
Ullman outlined 2005 highlights, noting that Penney’s operating profit increased 22.5 percent from $1.3 billion to $1.6 billion and as a percent of sales rose to 8.4 percent from 7.1 percent in 2004, a 130 basis point improvement. Comparable-store sales rose 2.9 percent, while Penney’s direct business rose 3.6 percent, with a nearly 28 percent increase for jcp.com, which hit $1 billion in sales in late 2005.
“We had an excellent year in 2005, but we’re just getting started,” said Ullman of Penney’s drive to achieve mid-tier retail dominance over rivals such as Federated Department Stores, Sears and Kohl’s, and mass chains such as Wal-Mart and Target that have dramatically stepped up their fashion trend offerings.
Ullman outlined a strategy that includes spending $3 billion to open 50 new stores a year from 2007 through 2009 — most of which will be freestanding off-the-mall units — and renovating more than 200 existing stores, dramatically shortening the time to get goods into stores and fine-tuning the synergies among its stores, catalogue and Internet divisions.
Ullman told the crowd of about 150 people that the 1,019-unit chain also is seeking to best its retail rivals by making emotional connections with its target consumers with lifestyle-driven fashions, heightened customer service and new Sephora beauty units in Penney’s stores starting this fall. At least half of Penney’s volume is generated by shoppers who are 35 to 54 years old, 80 percent of them female.
“Retailing is a contact sport and it’s all about winning the customers by understanding her needs, wants and lifestyles,” added Ullman. “We’re focusing on businesses that our core customers feel strongly about.”
Penney’s guidance for 2006 sales calls for low-single-digit gains for stores open at least a year and low- to-mid-single-digit gains for its direct business, which includes catalogue and Internet. In guidance for 2007, Penney’s plans for low-single-digit same-store sales gains and mid-single-digit gains for direct sales.