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J.C. Penney (JCP)Stock (Department Stores Industry, Fashion Industry Industry, Retail Industry)
 This article should cite more sources.  Founded in 1902, J.C.Penney (NYSE:JCP) is one of the United States' most widely recognized department chains. The company underwent significant restructuring starting in 2001, when big box retailers such as Wal-Mart and Target were stealing the company's customers away. From 2003 to 2006, J.C. Penney had grown revenues about 4% per year, however sales dipped less than 1% to $19.8 billion in 2007. The company operates over 1,000 retail stores in mostly mall-based locations as well as direct sales--15% of revenue in 2006--from both catalog and e-commerce channels. In order to meet its customers' needs, J.C. Penney has taken on several key strategic and operational changes. First, while most of its current stores are anchored in malls, most of its new stores are being built in standalone locations, as consumers are spending more time away from malls. Second, in order to be more aligned with key fashion trends, J.C. Penney is looking to decrease the time it takes to bring products to market (this will also decrease inventory costs). Finally, the company is following in the footsteps of many other major retailers by increasing the mix of private and exclusive label products, which currently drive about half of all sales. These goods are typically higher margin and can drive store loyalty by being available exclusively at J.C. Penney locations. J.C. Penney is at risk of decreased growth if rising oil prices continue to cut into discretionary spending and lower housing prices decrease consumers' purchasing power. The sales stagnation in 2007 was largely due to adverse economic conditions caused by the subprime lending crisis in the summer of 2007. The weak economy weighed on J.C. Penney's start to 2008, as same store sales in the first and second quarters of the year decreased 4.7% and 4.3%[1], respectively, compared with the same quarters of 2007. The tough retail environment has led the company to cutting back on its expansion plans, as management revised down its planned store openings and renovations for 2008 from 50 to 36 and from 65 to 20, respectively.
[edit] Company Overview In its storied history, J.C. Penney has stood out as one of the United States' most innovative retailers, fostering the emergence of the modern American consumer. The company was first founded in 1902 by James Cash Penney and William Henry McManus as "The Golden Rule". Since becoming the eponymous J.C. Penney in 1913, the company has grown quickly. Today, the nationwide chain is one of the leading fashion retailers in the U.S., operating 1,033 department stores in 49 states and Puerto Rico. Some key milestones:
J.C. Penney focuses its efforts on fashionable, affordable, family-oriented merchandise. The company primarily targets customers with a household income between $35,000 and $100,000. J.C. Penney divides its merchandise into several categories which include: Accessories, Apparel, Cosmetics-Men's, Women's, Apparel and Accessories-Children, Family Footwear, House Furnishings and Wares, Leisure and Recreational Equipment, and Jewelry and Watches. While shoppers can find a variety of brands at J.C. Penney, about 50% of J.C. Penney's merchandise is privately branded. Although the company's name is synonymous with department store shopping, the company also has a significant direct sales component that includes catalogs and its online website jcp.com.
[edit] Department Stores J.C. Penney's physical retail business accounted for 85% of the company's revenues in 2006, with over $16B in sales at 1,033 locations in fiscal 2006. The company has grown sales steadily since 2001, when J.C. Penney underwent significant restructuring in the face of stiff competition from big-box retailers such as Target, Wal-Mart and Costco. For the past few years, the company has focuses primarily on reducing costs and improving margins. Moving forward, the company has announced plans to ignite growth through department store expansion, better serving customer needs and making its production cycles more efficient. In fiscal 2007, same store sales (or sales at stores open for at least a year) were flat with no growth while overall sales declined less than 1%. [edit] Direct SalesJ.C. Penney's direct sales channels include its catalog online portal, which combined, generated 15% of revenue in 2006. While J.C. Penney's catalog business accounted for over $4B or 22% of the company's total revenue at one time, this channel has consistently been cannibalized by Internet sales. Catalog's accounted for approximately $1.8B in sales in FY 2006 compared to $1.1B for online. Since its inception sales have grown for jcp.com around 25% annually. J.C. Penney did not break out direct sales figures for 2007. [edit] Business Drivers[edit] Expansion into Off-Mall LocationsAfter years of shuttering stores to reduce inefficiencies and unnecessary costs, J.C. Penney has begun an ambitious plan to expand its retail footprint. The company is currently executing plans to open approximately 150 stores between 2007 and 2009. Over 80% of these new stores will be in off-mall or stand alone locations, as malls nationwide have seen declining traffic as consumers have turned to outlets and freestanding retailers such as Target (TGT), Wal-Mart Stores (WMT), and Costco Wholesale (COST). In 2007, the retailer added 50 new stores, 42 of which were in off-mall locations. However, these growth plans are being scaled back in 2008 as a difficult economic selling environment has caused J.C. Penney to revise down its planned store openings for 2008 from 50 to 26 and state that planned store openings in 2009 may fall as well. A shift to off-mall locations could provide several benefits:
[edit] Private & Exclusive BrandsIn addition to classifying consumer types, J.C. Penney has focused on bringing "private" and "exclusive" brands to market tailored to its customers' tastes and lifestyles. Department stores have increasingly sought to distinguish themselves by offering exclusive brands and private label brands. Exclusive brands are brands marketed under the wholesaler's name that are sold only in a particular chain. Private label brands are produced by wholesalers, but sold under the brand name of the retailer. Currently, just under 50% of J.C. Penney's merchandise is either privately or exclusively branded. In the last two years J.C. Penney has introduced a plethora of new private and exclusive brands including, Ralph Lauren's American Living, women's dress casual brands Nicole and W- Work to Weekend and home accessory brands such as Chris Madden Hotel Collection and Cooks. Private and exclusive products tend to provide higher margin than lower end merchandise. A continued expansion into these areas promises to boost profits. [edit] SephoraAdding to J.C. Penney's increasingly selective profile is its recent tie up with luxury cosmetics maker Sephora (J.C. Penney unsuccessfully attempted to launch its own cosmetics line over a decade ago). J.C. Penney has started to open Sephora locations inside of J.C. Penney stores, with over 47 locations established at the end of 2007 and plans for about 300 Sephora locations inside of J.C. Penney stores by the end of 2010. This partnership may prove to be beneficial to both parties for several reasons. First, executives at J. C. Penney and Sephora believe that the venture will capitalize on the close overlap between the two companies' target demographic, driving additional traffic to J.C. Penney and Sephora. Additionally, Sephora.com will become the exclusive provider of cosmetics to jcp.com, which should also augment each company's web presence. [edit] Bring Products More Quickly to MarketRetailers' efficiency and success is closely tied to cycle time, a metric that refers to the time it takes a new product concept, such as a new fashion line, to actually reach consumers. Generally, across the retailing industry, cycle times have been marked by inefficiency because of the long, step-by-step process entailed. J.C. Penney has launched a cycle time reduction initiative that it hopes will reduce its current cycle time from 40 weeks to 30 weeks using overlapping processes like designing, purchasing supplies and production to increase efficiency. A shorter cycle time will benefit J.C. Penney in two primary ways. First, reduced cycle time will allow the company to provide on-trend fashion to its customers more reliably Second, a quickly rotating product line reduces equates to lower inventory costs. Fast cycle times have greatly benefited specialty retailers such as H&M by allowing them to keep abreast of the fashion world. [edit] Competitive LandscapeAs a retailer, J.C. Penney faces stiff competition from many fronts, ranging from department store operators such as Macy's Inc. (M) and Kohl's (KSS) to specialty retailers like Abercrombie & Fitch Company (ANF) and big-box retailers like Wal-Mart Stores (WMT) and Target (TGT). In this crowded landscape, J.C. Penney's success will hang on its ability to distinguish itself from its competition and better serve niche consumer segments. J.C. Penney has focused on a target demographic of customers with a household income between $35,000 and $100,000 and has cultivated an image that will appeal to its most profitable customers. Central to this strategy has been a push into lifestyle, private and exclusive branding which attract the middle-aged, higher-income consumers that represent the company's base. J.C. Penney has further differentiated itself by shortening its cycle time which will help the company keep up with rapidly changing fashion tastes.
 J.C. Penney2004 Data 2005 Data 2006 Data 2007 Data 2008 Data Most Recent Data Available [edit] Operational Metrics
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