J.C. Penney turnaround plan focuses on private labels, omnichannel
J.C. Penney announced a three-year plan for accelerated growth and outlined its financial expectations for improved performance beyond 2017 at its analysts conference in Dallas on Wednesday.
CEO Marvin Ellison said the retailer plans to break even this year and turn a profit of $450 million to $500 million by 2019.
To achieve its goals, the retailer is expanding its private label efforts, special sizes and home appliance offerings. It will also focus on ramping up beauty products (including its successful Sephora concessions), speeding up its supply chain and expanding omnichannel efforts.
Here’s some perspective on where Penney is coming from, and where it’s going: Sales last year were $12.6 billion and executives said they aim to grow sales by $1.2 billion-$1.7 billion by 2019. But that doesn’t touch its annual sales of yesteryear, which were some $18 billion a few years ago.
Ellison emphasized that the retailer’s plans are not about returning to that number, but about driving sales growth and growing revenue per customer.
The retailer will take concrete steps to boost omnichannel, including shipments to any J.C. Penney store, same-day pickup and faster home delivery. By next year, the retailer said it will have a standard fulfillment speed of two days or less to more than 95% of U.S. customers. Executives noted that the retailer’s history as a catalog company means that it has the infrastructure to offer speedy omnichannel services, including ship-to-store options in all stores.
But Penney also decidedly aims to leverage its brick-and-mortar stores in those efforts. The retailer, which closed 41 stores last year and seven this year, said no more store closings are planned. In contrast, Macy’s this week announced plans to shrink its U.S. footprint by 100 stores.
Penney is also reassessing its merchandise assortment, according to the Dallas Morning News. Like Kohl’s, Target, and Amazon, Penney is boosting its private label lines in home goods and apparel, updating well performing lines. Penney is also differentiating by offering a range of clothing sizes, including special sizes like “big and tall” for men.
Its latest efforts in home furnishings, including tests of flooring and window covering sales and its rollout of appliance sales, is going well and is likely to be expanded, executives said. The company is shipping appliances directly to customers from manufacturers rather than warehousing those products itself. And Sears is helping its cause by closing stores, Ellison said.
"Sears is donating share in appliances,” Ellison said. "We have no aspirations to be No. 1 in market share for appliances. To do that, we have to own the inventory. But we think we can be disruptive and can be convenient to our customers."
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