J. C. Penney on Friday announced an organizational shakeup the company says is an effort to "streamline decision-making and promote greater agility within its merchandise buying teams." The struggling department store has eliminated the position of chief merchant, and John Tighe, the executive in that position now, will be leaving the company to pursue other opportunities, according to a company press release.
The leaders of three merchandise division heads will now report to CEO Marvin Ellison: Jodie Johnson, SVP and senior general merchandise manager of women's apparel, Sephora, salon, women's specialty, footwear and handbags; James Starke, SVP and senior general merchandise manager of men's apparel, children's apparel and jewelry; and Val Harris, SVP of product development and design.
Additionally, Tony Hurst, SVP and general merchandise manager of home, will have the added responsibility of custom window design and home services, as well as commercial sales, and will report to Joe McFarland, EVP of stores.
Department stores have slipped as holiday shopping destinations in many holiday forecasts this year, so their struggles may not be much eased by the boost in sales the final quarter brings. Last month Penney cut its outlook for the third quarter as the department store moved to clear inventory, via discounting, in its women’s apparel sections and said that it now expects a Q3 loss of 40 cents to 45 cents per share, more than double previous estimates, as well as an increase in comparable store sales of between 0.6% and 0.8%.
For the fiscal year, Penney now expects earnings of 2 cents to 8 cents per share and for comparable store sales to remain flat or drop by as much as 1%. The company estimates costs of goods sold to increase 100 to 120 basis points, compared to 2016, and general corporate expenses to decrease 1-2%.
Some observers are predicting grim news to come for a few retailers in that space; Macy's, Penney and Sears are likely to take drastic measures in the new year, according to retail analyst Nick Egelanian, president of retail development consultants SiteWorks International, who called Macy's and Penney "near collapse."
The departure of Tighe and the related shakeup aren't so much part of that collapse, but rather one of the last remaining levers Penney has left to pull, Egelanian told Retail Dive in an email. "This is, however, an indication that the department store model is broken and department store companies are running out of bandages to fix it," he said.
In his statement Friday, Ellison expressed confidence in the remaining merchandising team and emphasized cost controls.
"Today's executive realignment reflects a growing need to ensure our company remains nimble and flexible amid the constant change and transformation in the retail environment. I have the utmost confidence in our executive leaders who will continue to drive efficiency across their respective divisions, and will be empowered to make dynamic buying decisions based on real-time customer data," he said. "This simplified structure offers greater flexibility, which is critical to ensuring our assortment remains fresh and relevant, and compels more shoppers to choose JCPenney."
But except for its Sephora concessions, Penney has struggled to connect with shoppers, particularly in apparel, and some analysts have been clamoring for the department chain to move more quickly in its turnaround. Neil Saunders, managing director of GlobalData, said in comments emailed to Retail Dive after the company's second quarter earnings release, "While we maintain the company is moving in the right direction, the lack of progress on profit and same-store sales both highlight that the turnaround program is a long-term endeavor that will take some time to deliver." In particular, Saunders pointed to the "much further work" Penney needed to do to improve retail sales, where womenswear especially remained "lackluster" in a flooded market often full of discounted merchandise.
In the long-run, J.C. Penney and its peers face steep existential challenges. Mass merchants have been cutting into their share for years. Amazon and other online players have been stealing apparel sales. And off-price sellers have been growing like gangbusters, as customers seek out steep discounts and "treasure hunt" thrills. That growth has and will likely continue to come at the cost of department store sales.