J.C. Penney Co. (JCP) will open Joe Fresh shops in most of its stores tomorrow, a key test of Chief Executive Officer Ron Johnson’s strategy to turn most of the chain’s locations into collections of boutiques.
Joe Fresh, the apparel brand owned by Canadian grocer Loblaw Cos. (L), will be in 681 of J.C. Penney’s 1,100 stores and carry items such as patterned pants and silk short-sleeved blouses, for mostly under $40, Siiri Dougherty, J.C. Penney’s general merchandise manager of women’s apparel, said in a telephone interview yesterday. J.C. Penney will advertise the brand online, through direct mail and in stores, which will each hold a sweepstakes to win months of Joe Fresh apparel, she said.
J.C. Penney, which last month said annual sales slid 25 percent to $13 billion, is betting new brands such as Joe Fresh will resonate with core customers and attract new shoppers as Johnson works to overhaul the retailer. In September, Johnson said Joe Fresh, which first opened U.S. stores in 2011, is a “pretty good answer” to popular fast-fashion pioneers such as Inditex SA’s (ITX) Zara, Fast Retailing Co.’s Uniqlo and Hennes & Mauritz AB’s (HMB) H&M.
“This shop opening is a seminal event for J.C. Penney,” Rick Snyder, an analyst at Maxim Group in New York, wrote in a March 11 note. “Should the shops succeed, the turnaround story could still have legs. If they fail, investors could quickly lose hope that a turnaround is beginning,” wrote Snyder, who has a sell recommendation on the shares.
J.C. Penney fell 1.7 percent to $15.39 at the close in New York. The shares have declined 22 percent this year, compared with an 11 percent gain in the Standard & Poor’s 500 Retailing Index.
Joe Fresh, designed by Joe Mimran, who founded Club Monaco Inc., was introduced about seven years ago for Loblaw as a way of competing with Wal-Mart Stores Inc., which was expanding in Canada. The stores performed well enough to make standalone locations and Loblaw has sought to expand it internationally.
The brand has already been a hit online for J.C. Penney, where it was introduced last month. In its first few days, Joe Fresh had seven times the visitors of J.C. Penney’s top online brand, Liz Claiborne, mostly from first-time buyers, Johnson said in a Feb. 27 earnings call.
The Joe Fresh boutiques will carry bright, trendy women’s merchandise ranging from $4 flip-flops to $69 dresses, and it may expand to other audiences throughout the year, said Dougherty, a Plano, Texas-based senior vice president who has worked at J.C. Penney (JCP) for about eight years. Most Joe Fresh locations will not be in a mall with an H&M, and the style is “more comprehensive” than what Uniqlo offers, she said.
“I don’t think initially people will know what Joe Fresh is, but once word gets out, it spreads like wildfire,” Dougherty said, pointing to Joe Fresh’s quick rise to popularity in Manhattan, where its U.S. stores are concentrated. “We’re hoping that our current customer base will find something new and exciting, and we’re hoping that it’ll appeal to a whole different customer base that really hasn’t been into a J.C. Penney in a very long time, if ever.”
She said the style of “attainable fashion” should appeal to everyone, from 18-year-old to 50-year-old shoppers.
Johnson has said the shop-in-shops provide higher sales per square foot than other parts of J.C. Penney. The company plans to introduce close to 20 new boutiques this spring, with a particular focus on its home department. Johnson said that it will be easier to assess a return to growth after more of the stores are opened, with 30 percent of the transformation reaching completion by the end of May.
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