J.C. Penney Will Get Boost From New Home Areas, CEO Says

J.C. Penney Co. (JCP), the department-store chain looking to rebound from its worst sales year in more than two decades, will get a boost from the opening of renovated housewares sections this month, Chief Executive Officer Mike Ullman said.

For any doubts about whether its shoppers will embrace new lines like $60 toasters from architect Michael Graves or pay $1,695 for a chair from Happy Chic by Jonathan Adler, Ullman points to Sephora. People had the same concerns about the cosmetics brand when he introduced it to the chain in 2006 during his first stint as CEO.

“People said that it was too pricey, it’s not promotional,” Ullman said in an interview at an event in New York to introduce the new home department. They said “that the customer isn’t going to understand it. Now it’s the most profitable part of the store.”

Ullman, 66, who took back the CEO job in April when his predecessor,Ron Johnson, was ousted after 17 months in the job, is trying to win back customers who left in droves during Johnson’s tenure. Johnson alienated longtime shoppers by axing most discounts and diminishing or removing house brands in favor of more youth-oriented labels like Joe Fresh.

The housewares department with areas dedicated to brands like Martha Stewart will be in about 500 of the chain’s 1,100 stores and are the biggest piece of Johnson’s plan to be implemented.

The new wares are likely to resonate with shoppers in stores after sales of the products online over the past two months were encouraging, Ullman said.

Second Turn

The returning CEO started his second turn at J.C. Penney by taking out a $2.25 billion loan and borrowing $850 million from the retailer’s credit line to help shore up its finances. Now he’s made his top priority attracting more shoppers to stores and getting them to buy more when they visit.

To increase store traffic, the Plano, Texas-based retailer’s advertising now focuses on promotions that have an expiration date to create a sense of urgency that was absent under Johnson. Once shoppers arrive, the company is betting that the return of several house brands, including St. John’s Bay, will get them to buy more.

Johnson originally planned to build 100 branded shops within 700 of J.C. Penney’s outlets to transform them into what he called specialty department stores. His rationale was that specialty chains like Gap Inc. and Williams-Sonoma Inc. (WSM) had been taking market share from department stores for decades. Johnson took it as a signal that people preferred to shop at smaller chains in their local mall and so decided on building a sort of mall inside J.C. Penney.

Revamped Departments

Only eight of Johnson’s shops were completed by the time he left the company. The opening of the revamped home departments will add 20 more dedicated to brands and categories such as sleep.

Ullman served as J.C. Penney’s chairman and CEO for about seven years before Johnson, 54, took over.

In the year ended Feb. 2, sales plunged 25 percent to $13 billion, the lowest since at least 1987. In the quarter ended May 4, the company’s loss widened to $348 million from $163 million a year earlier.

During Johnson’s tenure, which began on Nov. 1, 2011, the stock dropped 50 percent.

J.C. Penney slipped less than 1 percent to $18.15 at the close in New York today. The shares have gained 14 percent since Ullman’s return on April 8.

To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net

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

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