J.C. Penney Co. Inc. has gone inside for its top merchant.

This story first appeared in the March 1, 2012 issue of WWD. Subscribe Today.

Elizabeth Sweney, a 12-year veteran of the company and its executive vice president and general merchandise manager of women’s apparel, has been elevated to chief merchant of the Plano, Tex.-based retailer.

During her tenure, Sweney, who also oversees juniors and the Sephora business, has been credited with the launch of several successful private and exclusive brands, including Liz Claiborne, MNG by Mango, Call It Spring, a.n.a., City Streets, Decree and I [Heart] Ronson by Charlotte Ronson. Before joining Penney’s in 2000, she held several senior-level positions at Kellwood Co. and also spent 17 years with Montgomery Ward & Co.

Sweney’s promotion fills a major hole at the company, which is in the midst of a massive overhaul under the direction of new chief executive officer Ron Johnson. Sweney, who oversees the largest division within J.C. Penney, is the only executive within Johnson’s restructured top management tier to come from within. Since Johnson took the reins of Penney’s in November, he has made several high-profile hires from outside the company, including Michael Kramer, former Kellwood ceo, as chief operating officer, and former Target Corp. executive Michael Francis as president.

Sweney reports to Francis. Neither could be reached for comment Wednesday.

Sweney’s promotion shook up the buying team at Penney’s, however. Steve Lawrence, another Penney’s veteran who had served as executive vice president and gmm of men’s, has left the company, as has Clarence Kelley, executive vice president of planning and allocation.

A Penney’s spokeswwoman confirmed the shifts Wednesday afternoon and said that, with the exception of Lawrence and Kelley, “I am not aware of any additional changes.”

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Industry sources expect the merchandising staff to be significantly trimmed in the next few months as Johnson begins to execute his new vision for the retailer. A top executive at a competing retailer in the Southwest said he has received numerous résumés from Penney’s employees who have left the company already or are nervous about their futures.

Johnson’s plan to remake the department store chain involves everything from reducing and changing the cadence of the company’s promotions to revamping store design. On the merchandising end, Penney’s has said it will significantly reduce the number of brands carried in the store — to 100 from 400 — and convert the selling floor to a series of individual shop concepts over the next three-and-a-half years. The first shops will make their appearance around Aug. 1 and new ones will be added at the rate of two to three a month.

In her new role, Sweney will be charged with deciding which vendors will make the cut and which will fall by the wayside.

Johnson said during his presentation in late January of his new plan: “You will see improvements in the merchandising in the spring, but it will be dramatically different in the fall.”

Penney’s reinvention is going to be costly, both in terms of dollars and personnel, the company has acknowledged. In the presentation to vendors in January, Kramer said the goal is to reduce selling, general and administrative costs to a “sub-30 percent rate by 2013” and 27 percent by 2015. In 2010, Penney’s SG&A was 33 percent of net sales, a figure significantly higher than that of competitor Kohl’s Corp., which came in at 27 percent. “That 6 percent differential represents $1 billion,” Kramer said.

In order to reach that financial goal, Kramer said the company “highlighted…roughly $400 million in expenses at the store level that we can cut over the next year,” as well as $300 million from advertising and $200 million from the home office, which employs around 5,900 people.

Kramer said Penney’s has been operating with “eight layers of management,” while most of its competitors have five to seven. “We believe in a flatter organization, not a fatter organization,” he said.

All told, Penney’s has projected that it will spend $800 million this year on the transformation of its business.

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