J.C. Penney Loses Caribou Coffee Cafes for Revamped Stores

Caribou Coffee Co. will no longer pursue plans to open shops inside J.C. Penney Co. (JCP) stores, about six months after Chief Executive Officer Ron Johnson cited the company as a potential partner.

The Minneapolis-based coffee seller won’t be opening stores in J.C. Penney locations and “does not have plans to move forward with a partnership at this time,” Caribou Chief Executive Officer Mike Tattersfield said in an e-mailed statement today. Johnson discussed the cafes during a September tour of a prototype store for analysts and investors. Tattersfield declined to say why Caribou was pulling out.

The loss of the cafes comes as Johnson struggles to transform most of J.C. Penney’s stores into collections of boutiques peppered with eateries, or a kind of mall within a mall. The department store chain reported an annual sales decline of 25 percent to $13 billion about two weeks ago. In September it said Caribou cafes would provide a place for customers to relax and help the coffee company expand.

Daphne Avila, a spokeswoman for Plano, Texas-based J.C. Penney, didn’t immediately return a voicemail and e-mail seeking comment.

Caribou Coffee, acquired by Joh. A. Benckiser Group earlier this year for about $340 million, has put locations in other retail stores, including Jewel-Osco, the grocery chain that Supervalu Inc. (SVU) agreed to sell to Cerberus Capital Management LP in January. Caribou also has shops in Lunds and Byerly’s grocery stores in Minnesota and at Hy-Vee markets in the Midwest.

Caribou had 610 coffee shops, including 202 franchised locations, as of Sept. 30. The chain has said it’s targeting 10 percent to 20 percent unit growth this year in cities including Washington and Chicago.

J.C. Penney, which has 1,100 stores, gained 0.6 percent to $15.48 at the close in New York. The retailer has lost 21 percent this year, compared with a 9.4 percent advance for the Standard & Poor’s 500 Index.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net; Sapna Maheshwari in New York at sapnam@bloomberg.net

To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

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