PVH Corp. (PVH)’s new Izod stores at J.C. Penney Co. (JCP) are a hit with customers -- a sign Chief Executive Officer Ron Johnson’s plan to turn most of the department stores into a collection of boutiques is getting some traction.
“From a sales point of view and a margin point of view, the Penney’s business is running on or ahead of plan and given what their sales trends are, we think that’s a grand slam home run,” PVH CEO Manny Chirico said yesterday at the ICR XChange conference in Miami.
A measure of revenue per product is 20 percent higher at the Izod shop-in-shops at J.C. Penney, implemented about five months ago, compared with other department stores through Jan. 12, Chirico said.
One brand’s success does not a turnaround make. J.C. Penney’s sales have dropped 20 percent or more for three straight quarters as Johnson struggles to overhaul the fourth- largest U.S. department-store chain. Traffic has fallen as Johnson, Apple Inc.’s former retail chief, works to remake the company by eliminating sale events, adding stylish brands and creating an array of branded shops within most stores.
Still, PVH has lost traction in dress shirts at J.C. Penney -- slack that Kohl’s Corp. (KSS) has picked up -- because of their poor “value message,” Chirico said during a question-and- answer session with investors and analysts.
“Penney’s strength was selling commodities,” he said. “White socks, dress shirts, underwear, women’s intimates, pajamas -- that was what Penney’s strength was, and basically, this strategy that’s been implemented has basically killed that” view of the business, Chirico said.
Johnson initially sought to offer “everyday low prices” in the place of coupons and sale events with the idea of creating a more honest shopping experience. Instead, many customers were alienated and confused by the changes. Since then, Plano, Texas-based J.C. Penney has tweaked its pricing strategy, adding back sales and announcing plans to put “suggested retail prices” on merchandise tags.
“They understand they need to have a value message, they finally put that in,” Chirico said. “They have a hard time saying the word ‘sale’ because they put themselves in a corner about it but I think there will be national events as we start spring.”
The effort will still “be a bit of a struggle” as consumers trickle back in and the store environment improves, he said. “It’s always been a very profitable account for us, it’s just not as big as it has been.”
J.C. Penney is scheduled to report fiscal fourth-quarter results on Feb. 27. The company’s shares, which slid 44 percent last year, the worst since 2008, rose 4 percent to $18.87 at the close in New York.
PVH, based in New York, fell 0.8 percent to $118.02 and had advanced 57 percent last year.
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