PLANO, Tex. — With a little more than two months before he takes the reins as J.C. Penney Co. Inc.’s chief executive officer, Marvin Ellison has set a goal: Profitability by the end of 2017.
Ellison, president and ceo-designee of Penney’s, told shareholders at the annual meeting here Friday that the midtier retailer will move into the black by adding a total of $3.55 billion in sales and reaching $1.2 billion in earnings before interest, taxes, depreciation and amortization by the end of 2017.
“This brings us to what I call full financial recovery,” said Ellison, who will succeed the current ceo, Myron “Mike” Ullman 3rd, in that role Aug. 1. “That is very important for the company and very important for the future of our share price.”
Moving the needle in the manner Ellison described won’t be easy. A $3.55 billion increase in sales would bring revenues to $15.8 billion, nearly 29 percent above the $12.26 billion generated last year. Penney’s celebrated its $1.1 billion improvement in EBITDA last year and the year-end figure moved into the black, at $323 million.
Last year, Penney’s net loss was reduced to $771 million from $1.39 billion in the prior year, while net sales gained 3.4 percent. Earlier this week, the retailer said that first-quarter EBITDA was $168 million more than in the year-ago quarter as its net loss was cut in half, to $167 million, and net sales grew 2 percent to $2.86 billion.
Contributing to the planned growth would be $1 billion in additional sales in the core businesses of men’s, women’s and children’s apparel in shoes, plus another $1 billion in handbags, fashion jewelry, accessories and Sephora.
Home furnishings, which Ellison acknowledged was the hardest hit during Ron Johnson’s troubled tenure as ceo in 2012 and 2013, is gaining sales productivity on a per foot basis and the March launch of a spring and summer home furnishings catalogue – its first in five years – has been successful, the incoming ceo said, adding that more home books will follow.
Calling omnichannel “a defining strategy for the company” that “will take us to modern-day retailing,” Ellison expanded on a number of recent and upcoming initiatives.
A customer can currently pick up an online order in any Penney’s store, and the company plans to test same-day turnaround later this year, with plans to roll it out in 2016, he noted. In addition, Penney’s will increase the number of stores that can ship e-commerce orders, which currently stands at 160. As previously reported, Penney’s plans to offer an online Sephora store later this month.
“We know a customer who shops us on an omnichannel basis tends to be three or four times more valuable to us in terms of what they spend,” Ullman pointed out in his last annual meeting as ceo.
Ullman and Ellison both emphasized that building customer loyalty is key to the growth strategy and was the main focus at a conference and pep rally for all store general managers in March – the first such meeting Penney’s has held in five years.
Developing a “warrior spirit” among associates, a term borrowed from the enthusiastic corporate culture at Southwest Airlines, means empowering sales associates to take care of customers and establish the emotional connection that engenders loyalty, Ellison noted.
The effort was visible on the cubicles at company headquarters, which sported colorful handwritten signs promoting the “warrior spirit,” product hashtags and other promotional slogans.
“In the six months-plus that I’ve been with the company, I’ve been impressed with the resilience and hard-working nature of this culture,” Ellison said in his opening remarks.
Yet, with talk of putting its stormy past behind it, not all the commentary about Penney’s turnaround efforts was positive.
After the formal presentation, a shareholder questioned why the company was discontinuing its relationship with Joe Fresh.
Ullman responded, “We had about 15 brands introduced in 2012. Virtually all of those brands did not resonate with our core customer….We think we have assortments that are better suited to our customer.”