J.C. Penney Co. (JCP) aims to reverse its “huge miss” with core customers last year by expanding private-label lines such as St. John’s Bay and reviving promotions, said Chief Financial Officer Ken Hannah.
“We’ve done a number of things inside the stores that have allowed us to attract a new customer, and in some cases, that’s been at the expense of our core, and we cannot allow that to happen,” Hannah said yesterday at a consumer and retail conference held by Bank of America Corp. in New York. It was a “huge miss” to remove private-label items such as St. John’s Bay khaki and basic denim without offering alternatives, and those will return in April, he said.
Hannah’s comments came two weeks after J.C. Penney reported that annual revenue slid 25 percent to $13 billion, the lowest since at least 1987, during the first year of a transformation plan under Chief Executive Officer Ron Johnson. The department- store company has lost longtime J.C. Penney shoppers by experimenting with a shift to everyday-low prices, making marketing missteps and replacing classic products with trendy new brands. Ultimately, Johnson plans to turn most of the chain’s stores into a cluster of about 100 boutiques.
The timing of the transformation “is going to depend on how quickly we’re able to connect not only with the new, but with that core customer that we’ve somewhat alienated,” Hannah said. “We have to make sure everything we do is tied first and foremost to ensuring that the core customer is coming along with us, and then we want to be able to grow with new customers, but it can’t be at the expense of the core.”
The Plano, Texas-based company hasn’t tapped a $1.85 billion revolving credit line, and while it could raise $1 billion in debt markets, Hannah said he would be “much more comfortable doing that” once the company can show improving traffic and a return to growth. He reiterated that J.C. Penney still plans to self-fund the transformation.
The shares were unchanged in New York yesterday. The shares fell 11 percent to an almost four-year low earlier this month after Vornado Realty Trust (VNO), previously the second-biggest shareholder, sold almost half of its stake in the company.
Steven Roth, Vornado’s chairman who also sits on J.C. Penney’s board, didn’t “give any of us any indication that he was going to do anything with his shares,” Hannah said at today’s conference. Roth was supportive and constructive in a board meeting prior to the Feb. 27 earnings release, and made no mention of the impending share sale afterwards, Hannah said.
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