PLANO, Tex. — J.C. Penney Co. has big plans for the future: a $1 billion Internet business by 2006, a rebounding women’s division and a new-store program that includes more of its smaller but highly lucrative freestanding units — at least seven are planned to open by yearend.
Penney’s executives outlined their strengthening turnaround strategy before a crowd of Wall Street analysts at a two-day conference that ended Tuesday at the company’s sprawling Tuscan-style headquarters here.
“We want to be the moderate headquarters, the place customers think of first for shopping,” said Vanessa Castagna, chairman and chief executive officer of Penney’s stores, catalogue and Internet. “We think we’re on the right track.”
Castagna, along with chairman of the board Allen Questrom and other key executives, presented an upbeat forecast for the 1,020-unit chain, including projections to finish the year with a 2 percent comp-store sales gain and a 3 to 4 percent rise in the dramatically revitalized catalogue and Internet businesses.
Internet sales last year hit $600 million, up 50 percent over 2002. Penney’s reported revenue of $17.7 billion last year, marking its third consecutive year of comp-store gains.
Penney’s is soon to be flush with cash from its pending $4.53 billion sale of its Eckerd drugstore operation to The Jean Coutu Group and CVS Corp. But don’t expect any rampant expansion — it’s all about controlled, methodical growth and a meticulously defined outreach to its target shoppers, 80 percent of whom are women between the ages of 30 and 60.
Penney’s is carefully crafting a leaner but stronger game plan that’s aimed at winning customers from not only mass and discount chains that are beefing up moderate but other midtier competitors.
Much of Penney’s growth could come from off-mall stores, which allows the chain to extend its reach in important markets without reliance on mall development. It now has four freestanding prototype stores, a format it calls Box 1, that include wider aisles, brighter lighting, vibrant trend presentations, centralized checkouts and more compelling merchandise mixes.
At least seven off-mall stores are planned to open by the end of the year, with a potential for up to 100 more over the next few years, explained Penney’s executives, who gave analysts a guided tour of the chain’s freestanding 95,000-square-foot store in Cedar Hill, Tex., a small community about 20 miles south of Dallas.
The Box 1 format also is planned as a template for most new stores built within malls and for store renovations.
Penney’s stores located within malls generate about $143 per gross square foot, while off-mall stores generate $200 per gross square foot, although average unit retail figures are about even, according to Penney’s company data.
Women’s fashion has been a soft spot at Penney’s for a few seasons now, but a stronger private label push and several new national labels, including Bisou Bisou and Parallel, are adding renewed spark to the category. Women’s contemporary is up by double digits, junior is a hot category and career is rebounding in a big way, explained Castagna.
Other best-selling categories are fine jewelry, children’s apparel, window treatments, bedding, housewares and furniture and innerwear.
Penney’s private brands generate at least 40 percent of the chain’s volume and include the $1.5 billion J.C. Penney Home Collection; the $1 billion St. John’s Bay lifestyle apparel for women and men; Arizona, a fashion and basics denim line; MixIt knits and fashion separates; Delicates innerwear; Stafford men’s dress shirts and suits; Okie Dokie, a new children’s brand, and Chris Madden, a home collection brand.
“Private brands are our weapons to increase business,” said Lana Cain Krauter, executive vice president and general merchandise manager. “Private brands are growing at twice the rate of normal store growth and are becoming a bigger part of our merchandise mix. They’re a major focus for our future and [are] one of our keys to profitability.”
Questrom said Penney’s strategy is to stay focused on offering fashion, value and quality within the company’s three shopping channels: store, catalogue and Internet.
“We’re ascending the mountain and can see the peak. We’re working hard to get there,” he said.