After four months on the job, Jill Soltau’s turnaround strategy for the struggling J.C. Penney Co. Inc. is coming into focus.
And Soltau, chief executive officer of the $12 billion chain, described women’s apparel and soft home goods as Penney’s “legacy strengths” and said they were crucial to the recovery.
On Thursday, Penney’s reported fourth-quarter declines in sales and profits that weren’t as bad as expected and helped drive the retailer’s troubled stock up 23.4 percent to $1.53.
Soltau suggested new brands and merchandise initiatives could be in pipeline.
“I feel good about our supply chain in our ability to source what we need to,” she said. “Propositions from the vendor community are inspiring us and aiding in our work.”
There’s also been an influx of talent into Penney’s ranks in “mission-critical roles,” Soltau said. Michelle Wlazlo on Friday becomes executive vice president, chief merchant, reporting to Soltau. Wlazlo worked at Target Corp. as senior vice president of apparel and accessories and was instrumental in transforming the presentation at Target’s 1,400 stores and in launching 15 private brands. Earlier, she spent nearly 20 years at Gap Inc. and its various divisions, and before that, she worked at Saks Fifth Avenue and Bebe Stores.
Penney’s also named John Welling as senior vice president, planning and allocation, and Mark Stinde as senior vice president of asset protection.
Now Penney’s is searching for a new e-commerce chief.
Already the company’s turnaround efforts include:
• Continued inventory reduction after last year’s 13 percent reduction. Spring seasonal buys are down from a year ago.
• Stepped up shrink-improvement efforts.
• Rethinking and revamping merchandise strategies and continuing to eliminate non-core categories.
• Closing 18 full-line stores and nine ancillary home and furniture stores this year. (More closures could follow).
• Honing the promoting. Penney’s hasn’t been as “strategic” as it should be in engaging with customers. “It might be a little confusing,” Soltau said. “You might not know when you can get the best value at J.C. Penney.”
• Strengthening omnichannel capabilities by improving the shopper experience and the assortment and by utilizing technology more effectively.
“We are looking to become a stronger omnichannel retailer,” Soltau told analysts and investors in a conference call. “We’re taking a lot of action and we are in search of a leader in e-commerce to make more progress faster.”
All the activity comes as Penney’s continues to report weak results, though in the 2018 fourth quarter, that picture wasn’t as bad as Wall Street expected.
Income for the quarter fell to $75 million, or 24 cents per share, compared with income of $242 million, or 77 cents per share in the same period of 2017.
Adjusted net income was $57 million, down from adjusted net income of $160 million a year earlier.
Total sales for the fourth quarter decreased 9.5 percent to $3.67 billion compared with $4.05 billion in the year-ago quarter. Comparable sales decreased 4 percent.
Jewelry, women’s, children’s and men’s apparel turned in the best performance, with particular strength in athletic and active apparel, special sizes, baby apparel and gear and outerwear. Toys also did well. Categories that underperformed included big-ticket areas in appliances and furniture as well as women’s accessories and handbags.
For 2018, Penney’s net loss was $255 million, or 81 cents per share, compared to a net loss of $118 million, or 38 cents, in 2017. Total sales for 2018 were $11.67 billion versus $12.55 billion in 2017. Comparable sales decreased 3.1 percent.
“For the past few months, I have talked to and listened to J.C. Penney associates throughout the field and in the home office,” Soltau said. “I’ve also spent time with our vendors, customers and other partners to gain their candid perspectives on our company both good and bad. I am very pleased with the level of support from our current vendors as well as potential new partners we are meeting with, who are excited to do business with us and are proposing new ideas, brands and initiative.
“I can’t comment on some of those brands and opportunities and partnerships that have been offered. I will tell you that they have been plentiful. I’ve been very appreciative of the support that the vendor community has displayed to date and we are moving as quickly as we can to get through the last couple of segments of our long-term strategy development so that we make the right decisions [with] the partnerships that we take on and the new brands that we launch.
“Based on everything I have seen and heard, I am even more convinced that J.C. Penney is a revered brand that has the capacity to deliver improved results.”
She said Penney’s is “developing a culture of accountability and urgency at all levels of the organization…While work to define a long-term vision is not yet complete, I am impressed with the recent progress, to eliminate non-core, low-growth categories and reduction of inventory. We need to continue to move faster.”
Penney’s has eliminated major appliances and furniture (although it is still clearing out some floor models in appliances and still carrying furniture online and in select Puerto Rico stores). Major appliances and furniture accounted for 2.7 percent of sales in 2018, but hurt operating profits. Penney’s also discontinued its subscription service for men’s big and tall styles.
Last quarter, women’s apparel comps rose 2 percent, led by outerwear, active, dresses, traditional, Liz Claiborne and Worthington.
“We believe women’s apparel is a historical indicator of the overall business,” Soltau said.
Fine jewelry comped up in the low-double-digits in the quarter, while children’s apparel was flat, but also exceeded the company-wide comp. So did men’s apparel, which saw particular strength in active and big and tall styles.
On Sephora, long a top-performing area inside Penney’s stores, “Our relationship is very strong and very exciting,” Soltau said, citing skin care as trending very well. According to the ceo, Penney’s is capturing some market share in malls where Bon-Ton stores were liquidated and to a lesser degree where Sears stores closed.
“This is a critical time in our company’s evolution,” Soltau said. “Our approach has to be different. We are moving fast to substantially address the areas where you can make a difference and to establish a long-term vision. We are not quite ready to share our vision going forward. We are about two-thirds of the way through it.
“J.C. Penney is a storied brand. It’s been part of the American consumer set for a very long time, our customer wants us to be restored to greatness, we are still doing a lot of business. We just have to improve how we are showing up.
“As I have walked the stores with the teams by myself and with our store associates, we have incredible products,” Soltau added. “We just have the opportunity to do a better job of highlighting that. And that will be helped and aided by reducing inventory levels.”