JCPenney eyes long-term results

Carole Sloan, February 26, 2001

PLANO, TX — As JCPenney moves to rebuild the company, its senior executives 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.

In a conference call last week after the annoucement of the company's year end results, Allen Questrom, chairman and CEO of J. C. Penney Co. said it would be "two to five years before we fully restore the profitability of our business to competitive levels, I am confident that incremental progress will continue to be made over the next several years."

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, Questrom said "the expense reduction has begin — we have a professional workforce, inventories are down."

Adding to the overview, Vanessa Castagna, executive vice president of the corporation and president and chief operating officer 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 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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