DALLAS — After a “painful” year of transforming J.C. Penney Co. Inc. and taking heat from Wall Street and losing customers because of it, chairman and chief executive officer Ron Johnson finally got some love Wednesday.
This story first appeared in the September 20, 2012 issue of WWD. Subscribe Today.
Johnson previewed the company’s Dallas mock-up of its store of the future to 300 investors and retail analysts, got some positive feedback and summarized some good results from new shops installed throughout the chain.
“I’m blown away,” William Ackman, ceo of Pershing Square Capital Management, who owns 25.2 percent of the retailer and board member of Penney’s, told WWD.
“Here’s what I think: J.C. Penney is the iPhone and the shops are applications.”
Ackman called the new Penney’s “the platform enabling vendors and retailers to roll out ideas that could already be very well known, or to roll out completely new concepts, and a platform for a brand to overnight have a presence in every market in the country. That’s what the power of this is.”
Ackman joined analysts and media for a 40-minute tour of the Penney’s mock-up, which is situated on the third floor of one of its stores in Dallas. The mock-up, which in July was first revealed to WWD and a few dozen major vendors, has been expanded to now feature a total of 17 shops and eateries across 30,000 square feet. It includes shops for Disney, Joe Fresh, Docker’s, Haggar, Cosmopolitan intimate apparel, the jcp private sportswear brand, Izod, Giggle baby togs and gifts, Carter’s, Liz Claiborne, dpHue hair color specialist, a Caribou coffee bar, a Sugar Shack sweet shop and a Paciugo gelato stand, among other elements.
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“You are in what you might call an art studio where we are creating the J.C. Penney of the future,” Johnson said. “We’re going to redefine the way America shops through a whole new interface in retail and a new experience.”
He was encouraged that the mock-up, which is not open to the public, earned high marks from five groups of consumers who toured it two weeks ago. Before seeing the new concept, they described Penney’s as “outdated, traditional and for old ladies.” But they described the mock-up as “vibrant, trendy and sophisticated…like going to a mall without having to [walk] long distances.”
The shops, which Johnson considers the heart of Penney’s reinvention project, “will be pure, meaning if you’re in the Disney shop, you’re going to feel like you’re in the Disney store.…Everything down to the people, how they’re trained, the signing, the experience, the hangars, the hangtags, are 100 percent the shop.”
Johnson expects to have 40 shops in place a year from now in Penney’s 700 largest stores, and ultimately 100 branded shops in total, including some with multiple brands.
Regarding the performance of the new shops so far, “The collective shops are comping 20 percent better than the rest of the store,” he said.
The new Levi’s men’s denim bars generated double-digit gains in August, and the Levi’s women’s shop is “growing so fast it’s not really fair to compare it.” In addition, Izod is posting gains of more than 50 percent in its new shops, and the new jcp private brand is exceeding expectations for women, though Johnson acknowledged that jcp men’s has struggled a bit.
Wearing Levi’s 508 jeans (bought while touring a Penney’s store) and a chambray shirt and loafers, Johnson compared the pain of Penney’s losses during the transformation this year to Apple Inc.’s struggles at the beginning of the millennium. And he had no illusions about one of Penney’s biggest challenges: “We gotta get a younger customer,” he said.
Johnson described business during August as “pretty good.” He remains adamant about not offering coupons, but he acknowledged that without them, business was tougher than planned in the last two weeks. “We don’t have a coupon to bring them into buy,” he said. “We don’t have a sale to get started on fall. So we’ve got to trust that when the weather turns and the time is right, that they’ll come back.”
While early expectations were that the shops would be separated by walls like a bazaar, Johnson said the team preferred a lighter, open feeling. There are still walls but they are 12 feet high, don’t reach the ceilings and have openings on either ends into adjacent shops. There are long sight lines across the selling floor, adding to a sense of spaciousness.
The tour also unveiled a more evolved concept for “The Street,” the 15-foot-wide aisle leading past all the shops, which is now dotted with amenities including desktop Mac computers, iPads and a Lego play area, all for free use.
The “town square” element of the plan hasn’t been mocked up yet but it could be situated in various parts of the store, Johnson said. It will feature seasonal decor, food and services, such as portraits with Santa during the holidays, he noted. Johnson also disclosed that Penney’s is going to introduce a new gift registry called “Present Company” for baby gifts and kids, and that he’s reserving space on the floor for additional brands and retailers yet to be revealed.
“We want to be the world’s favorite place to put their brand,” he said. “We think retail partners will pick us because it is a very low cost way to go to market. There’s no rent, no build-out.”