That confusing sea of racks and aura of “stuff” is disappearing from J.C. Penney Co. Inc.
As the retailer narrows inventory to match up to selling trends, the women’s selling floors are being recast into five distinct, easier-to-shop lifestyle departments.
There’s a greater emphasis on denim and casual merchandise, visual display to spotlight trends and outfits, and “inclusiveness” so plus sizes are displayed next to misses sizes and no longer out in left field. There is also an elevated, organized clearance area, with bright yellow signs and mannequins outfitted for style.
So far, Penney’s new women’s lifestyle approach is evident at 92 stores across the country.
“We set up the store to bring these lifestyles to life so that we could develop an emotional connection to the customer and engage them differently,” Jill Soltau, chief executive officer of J.C. Penney, told WWD. “We started in women’s. We have to win in women’s. We will continue to build out a very similar strategy in men’s, kids and home.”
Soltau also disclosed that the home floor will be an entire “reinvent” utilizing national and private brands, though she didn’t provide specifics.
The company is installing outdoor shops with apparel and gear in about 100 of its department stores; revealed the launch of an in-house brand called St. John’s Bay Outdoor, and has partnered with ThredUp to sell secondhand clothing. As far as redoing more women’s presentations on top of the 92, “I can’t speak to what we’ll do in spring quite yet,” Soltau said.
“Our strategy is living and breathing. We have been doing things very quickly in a scrappy way…We have a pretty aggressive timeline,” she said.
Under the leadership of Soltau who joined the retailer a year ago, and Michelle Wlazlo, executive vice president and chief merchant who came from Target six months ago, Penney’s has been working fast and hard to reset stores. Soltau has managed to overhaul almost the entire senior squad with experienced executives, but the team is up against a ticking clock and needs to reverse declining sales and trends or face extinction given Penney’s $4 billion in debt.
Last quarter, the company reported a net loss of $48 million and a comparable sales decrease of 9 percent, or 6 percent excluding the impact of exiting major appliances and discontinuing the sale of furniture in the stores. Last year, the company had a net loss of $255 million while comparable sales decreased 3.1 percent.
Recasting how women’s is presented is one piece, albeit a critical one, of an overall Penney’s turnaround strategy. Further details of the strategy are expected to be disclosed in an announcement soon on more in-store elements to enhance the customer’s experience on top of the new visual merchandising strategy.
The company is said to be meeting with lenders to restructure the debt, though no major maturities are near. The 850-unit Penney’s could close many more stores as part of the turnaround strategy, on the top of the 18 this year, and hundreds in years past. “Right now we have not announced any further closings,” Soltau said. “There is nothing to share at his point. We are looking at all of our stores to determine a strategy.”
In trying to revive Penney’s, Soltau stressed the role of research and data and her gut instincts. “We did focus groups. We talked to customers. We did surveys. We had two third-party organizations that helped us and they cross-referenced their information. It was very extensive and it was ongoing for six months.”
The company identified six customer segments and the one to target for the best results. “Let’s just coin our customer focus segment as the ‘shopping enthusiast,’ who lives life to the fullest every single day through great product and great experience,” Soltau said. “They will be the ones who have the ‘Frozen 2’ party when Disney releases the film [Penney’s is partnering with Disney on ‘Frozen 2’ merchandise] or puts on the cozy new socks to watch a favorite Christmas movie. They are most confident in their style vision yet they’re the most open to getting help because they always want to better their look. They’re most willing to invest time, effort and the money to get their look right. They are really connected to their families, friends and community and they are serious shoppers. And you know what else? The data told us they like the malls. But they have to have a great experience and feel inspired.
“The ‘all-in’ shopping enthusiast is our customer focus segment. It will halo onto all other segments. When we do things right for the shopping enthusiast, we will get more share of the other customers wallets.
“When I first came to Penney’s, I really didn’t know the J.C. Penney customer despite having spent 30 years in retail, mostly in mid-tier and discount department stores,” said Soltau, who formerly ran the JoAnn Stores fabrics and crafting supplies chain and earlier headed Shopko. Before that, she held senior-level positions in merchandising, planning and private brand management at Sears and Kohl’s and started her career at Carson Pirie Scott.
“I did not want to come in [to Penney’s] with preconceived notions,” she said. “I am a data-oriented, insight-driven leader. I have a great gut feeling, but I have to know the facts and I have to marry the art and science. We took time to do the research. If you think about what J.C. Penney has been through over the last decade there has been a lot of change and we have confused the customer. It is really important that we do everything with the customer at heart.”
That wasn’t the case during the Ron Johnson regime from 2011 to 2013. He reinvented Penney’s with a lot of flash, new merchandise, technology, and eliminated coupons, in a sweeping strategy that ignored what the company’s shoppers wanted and almost destroyed the business.
Soltau’s approach is far different and she makes that clear without pointing the finger on who did what in the past. Her strategy is by no means a reinvention. It’s more of a renewal, with a new internal vernacular to guide the merchandising. It’s also about leveraging the assets the company has, specifically its portfolio of private and exclusive brands such as A.N.A., Liz Claiborne and Worthington and partnerships with Sephora and Levi’s, among other brands.
“We are not trying to be someone that we are not. We are just trying to be the most powerful and relevant version of ourselves,” Soltau told WWD.
Past leaders at Penney’s have made efforts to improve apparel and accessories across men’s, women’s and children’s categories, as well as extended sizes, and have also stressed that improving fashion is key to a turnaround. Soltau said her approach, a different tack, is showing positive results so far, though no specifics were provided.
Penney’s new lifestyle approach organizes the women’s business into five different sections, internally dubbed:
• “All-day” fashions for 9-to-5 activities whether that’s work or volunteering. “With the casualization of America, most often that is based in denim. And women need great tops to go with denim or a sweater, or a jacket in a denim look depending on what their day is about,” Soltau said. A.N.A. and Levi’s are key brands here.
• “On-point” for polished looks for interviews, presentations, business meetings and maybe to meet the future in-laws, for a “more polished and refined look.” Worthington and Liz Claiborne are key.
• “Move” for activewear, including high-performance active and leisure styles. “It’s for the get-up-and-go you. It can be a 10-mile run, or it can be a walk around the block, yoga at home or just some stretching. We are not just offering technical high-impact activewear. It’s really more inclusive than just activewear,” said Soltau. Nike, Adidas, Puma, Champion, Reebok and Xerion are key.
• “Chill” for the 5-to-9 time slot. “This casualization of America has created a need for great-looking apparel that you just want to chill in,” Soltau said. “It might be at home. It might be a casual dinner with friends. It might be running errands. In the time between getting home from work and going to bed, so much can happen, like a delivery person coming to the door at any hour of the evening.” Casual sweats, hoodies and loungewear are big components, and traditional sleepwear is situated adjacent. Penney’s Ambrielle brand is key.
• “Shine” for the special occasion, be it a homecoming, a wedding or a romantic date. The assortment includes Evan-Picone and Jessica Howard.
At the 180,000-square-foot, three-level Penney’s store in the North Star Mall in San Antonio, Tex., Soltau first takes a guest to see the set up at an entrance.
“This is a hardworking first 10 feet,” said Soltau, indicating the fall statement of mannequins positioned on pedestals of varying height so they all stand out. They’re cross merchandised with products from Penney’s private brands, in spice and brown fall tones. “It’s a mix of A.N.A and Worthington styles, with surrounding products to amplify the message.” On the right were “all day” fashions, to the left “on point” fashions.
“Customers want cues. That’s something that we have been missing for so long,” said Soltau. “The one thing I’ve heard most often since I took this job is, ‘just help me with my style. I will buy more if you just help me.’ When you see the look on a mannequin or in a graphic, right there you will sell that whole outfit. If it’s just a sea of racks and people have to pick through it and figure it out themselves, it’s much more difficult.”
With those first few steps inside Penney’s, “We are really signaling change,” Soltau said. “We are signaling that J.C. Penney is about style and fashion, but also that we are going to make it easy for you to put your looks together. You can see just all the mannequins that are right inside the store and its bridging between ‘all day’ and ‘on point.’
“This is the first time we pulled beauty out of the Sephora shop proper. They are our partners in our strategy. The fact we have Sephora outside the shop creates this cross merchandising, to put your whole look together. We know the shopping enthusiast wants the complete package.”
San Antonio is where the company first started testing strategies because it attracts a cross section of customers in a large metropolitan area and because Soltau said the team there was capable of acting fast to make changes. It’s also where Penney’s is testing a style room for more personal shopping with stylists; lounges for water, snacks and to a take a break from the shopping, and workshops. “Could our store become a community hub for learning, such as how to perfect the smoky eye, for Sephora classes, for how to put a great casual look together, or demonstrating new cooking appliances?” asked Soltau.
Given Penney’s declining fortunes, some industry experts believe the $11.5 billion Plano, Tex.-based retailer lacks the capital to sufficiently refresh its stores, rebuild the web site and update technology.
“We don’t see it that way at all,” Soltau responded. “We are very comfortable with our liquidity position in order to rebuild the business as I have talked about and do many of the things we need to do. As we have put out publicly, we are being very proactive on our capital structure to insure that we continue to have the cash and liquidity we need to move forward.”
Cap-ex has declined to a projected $300 million to $325 million this year, from $392 million last year and $427 million in 2016. But Soltau said, “The great thing about everything I am showing you today is it’s really no capital, aside from some added labor and signage. Specifically we are very focused on areas that we want to invest, we know that both from non-capital and capital sides, we have a strong plan and a way to march forward as we improve the business.”
The company is said to have started meeting with lenders to restructure the debt and postpone maturities. Penney has about $1.75 billion in liquidity so it can handle near-term payments, but does have more than $2 billion of its total $4 billion in long-term debt coming due in 2023
“We don’t have anything of great value coming due for several more years,” Soltau said. “I have met with our investors. They are comfortable. We are not feeling pressure from them. We are just being proactive on this.
“Certainly, I knew it would be a challenge coming in and I weighed that in a detailed way before accepting the role. But I also saw what Penney’s could be. I watched from the sidelines for years and years having always been a competitor, to see what was happening. I just knew based on my experience, every role in my career has led me to this and put me in a position to lead this organization through a renewal plan.”
Moving to the “all-day” section, Soltau observed, “A.N.A. Is the best representation of all-day. This is for the 9-to-5 you, to be able to put your looks together for what you need. It’s steeped in denim and casual bottoms. A.N.A. is becoming a denim-based lifestyle brand, driving this all-day moment and partnering right across the way with our really credible national brands.”
At the “move” section, Wlazlo observed, “Activewear is one of our best businesses and we continue to feel it. We moved all of performance active together, men’s and women’s across from each other, with a combination of Nike, Adidas, Champion, Puma. Previously, they were mixed in with women’s apparel, and we are actually celebrating this attitude all on its own — national brands mixed in private brands, but most importantly, we brought all the active shoes up here. Resoundingly, this is the best performing part of this store.”
“I look at this as the new department store, really merchandised to connect emotionally customers and how they live their life, and breaking down the square footage to make it much more shoppable and manageable,” said Soltau. “We know that 80 percent of our transactions happen in the store. It’s rare when a customer shops a department store broadly, so this just makes it easier.
“Putting those lifestyles together, the storytelling becomes that much easier. It makes it into bite-sized chunks, easier to navigate.”
Asked when Penney’s might turn the corner and show positive results, Soltau replied, “I don’t have an outlook for you today. There has been a lot that has gone on here, but this is going to take some time. Retail is a dynamic business and there are many facets that are all interconnected and interrelated. We have a very clear view of what we are doing and what we need to continue to do and we are moving as quickly as we can. It’s a thousand touchpoints a day for every single one of our associates. There is a great energy in the organization and we are moving quickly. It will take time but we are very confident we will return J.C. Penney to sustainable profitable growth.
“We are building this plane while we’re flying it.”