JCPenney eyes long-term results

Carole Sloan, February 26, 2001

PLANO, TX -As J.C. Penney Co. moves to rebuild the company, its senior executives are projecting positive results no sooner than 2002, the result of tighter coordination between merchandising and marketing.

For this year, the department store/catalog/Internet business should have a low single-digit sales decline in the first half, a somewhat better second half, with the full year coming in at low single-digit declines in sales.

According to Allen Questrom, chairman and ceo, it will be two to five years before JCPenney can be fully restored to profitability.

Looking at February sales, Penney projects comp sales decreases of low single digits, but home furnishings were one of three strongest businesses.

Key to reversing the giant retailer's decline, Questrom said, will be moving beyond the new centralization of its buying process, to "merchandising, marketing, execution and cost cutting."

"Merchandise assortments are the key, and marketing will focus on the assortments, not events," Questrom emphasized. "We've got our inventories down, and our Internet business has been very successful on the top line." There also is progress on the bottom-line Internet segment, he added.

Alerting the Wall Street market to when these changes will be most obvious, Questrom said, "We've ramped up our advertising and are changing the type of ads we run and the second half will be most effective when the assortments and marketing are lined up." In terms of cost, Questrom noted that savings in SG & A will be offset by the increased advertising dollars. "We are in a more competitive, more promotional environment."

In addition, he said, "the expense reduction has begun-we have a professional work force, inventories are down."

Adding to the overview, Vanessa Castagna, executive vp of the corporation and president and coo for JCPenney stores, catalog and Internet, said that in the new approach to merchandise, "we are focusing on categories and classifications, more trend-right private brands and national brands. We're narrowing the assortments and taking $1 billion in inventory out."

What will remain, Castagna explained, "will be key items and categories that customers want. It could represent a 30 percent to 40 percent reduction in some categories."

Among the other merchandise objectives, Castagna related, "is cutting lead times, having fashion-right assortments, getting suppliers more involved in supply chain management. We need to have the customer coming back quickly for fashion/value."

The price promotions, she added, "are not about 50 percent off. We will be offering consistent value, plus in-stock merchandise and quality."

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