Questrom needs two years

Carole Sloan, November 27, 2000

PLANO, TX -Saying decisively that he "underestimated the degree of severity" of the problems facing J.C. Penney, Allen Questrom, the troubled company's new chairman and ceo emphasized that the company faces a two-year transition.

"Assortments and marketing are our number-one problem," said Questrom.

In a conference call earlier this month after the results of the company's third-quarter were released, Questrom added, "We've been challenged by who we are. Over the years we have tried to go to upper brands." But positioning Penney under his watch, which began in mid-September, Questrom pointed out that "many department stores have gone out of the moderate brands. We have that branded merchandise."

Customers don't need another upscale department store. "We're in great malls and great locations, and we have the brands," Questrom said. Alluding to the marketplace pairing of Penney and Kohl's as competitors, he added, "Kohl's is not in the malls."

Addressing the subject of brands vs. private label, a subject that has embroiled Penney management for a number of years, Questrom was succinct when he said, "We're going to have a balance between brands and private label. We always have had the private brand of great quality and value, but we enjoy brands. There will be not set percentages. It will be what our customers want to buy."

And noting that he has spent the past weeks visiting stores, "some 50 or 60, and all of our key competition, I see our assortment is not competitive from a depth, fashion or price standpoint. It was not a 2000 problem, it didn't just happen; it began in the '90s."

Assortments, Questrom added, "will be a major focus. It's not a quick fix. It requires a complete change, and it will be a disruption to the organization through 2001."

Things like lighting and coloring in the stores are just part of the process. "It's not part of the major problem. If you give customers good value, they will go into the worst-looking store," he said.

Commenting on progress thus far, after more than a year of analysis, Vanessa Castagna, executive vp, coo, related, "We have had significant declines in sales and gross margins for the third quarter," and expectations are similar for the fourth quarter. "We've made some progress in merchandise content, including home," she said.

Castagna also noted that "our supplier compliance program has been in place since July. Our marketing events and promotions will be a major focus for '01."

Talking about changes ahead, Questrom said, "We have been menu planners. Now we will be planners and distributors. There will be a central distribution and marking process."

One of the challenges, Questrom noted, "will be managing the variety of formats and attracting and retaining the people to run them. We've got to get focus."

As for how Penney will implement these changes, and who will fill the slots needed to make it happen, Questrom said, "I have a folder of people wanting to come to work for J.C. Penney."

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