Stores Plan for Weak Holiday Sales

Retailers Respond to Shaky Economy With Earlier Ads, Fewer Seasonal Workers

As economists predict the worst holiday sales season since the recession of 1991, retailers are fighting back with an arsenal of new selling strategies, staff cutbacks and more emphasis than ever on low prices.

Retailers are planning bigger, bolder and earlier ad campaigns to lure shoppers as early as possible, racing to make the most of the shorter holiday season this year-five fewer days between Thanksgiving and Christmas than in 2007. Some chains, including Macy's Inc. and Costco Wholesale Inc. already have put out holiday merchandise.

Stores are expected to hire fewer part-time staffers during the holidays, to control labor costs. Gift cards will be fancier, and companies, such as Target Corp. say they'll be emphasizing affordability with a range of gifts under $25. . . . more

Penney Still Focusing on Off-Mall Growth

PLANO, TX-As mall vacancies increase, J. C. Penney Co. continues to examine its real estate, relocating stores in underperforming malls to off-mall sites, management said at its second-quarter conference call.

The company’s problem mall stores were closed six or seven years ago, noted Myron E. (Mike) Ullman III, chairman and CEO. The vast majority of Penney’s new stores are in its off-mall format, in part because of dramatic slowdown in new mall development. Relocating to shuttered anchors in malls is being examined closely.

“Given that we want to keep flexible, we don’t want to take someone else’s problem and make it our own,” Ullman said. “There is going to be a lot more consolidation than has been announced, in our view.”

Plans call for opening 35 new or relocated units in 2008. One store originally scheduled for this year has been deferred to 2009. The company also will renovate a total of 20 stores this year. The company will open 12 new stores in the third quarter, 11 of them in the off-mall format. The chain also continues to expand its Sephora in-store makeup boutiques, and will open 10 in the third quarter for a total of 91.

“[Sephora] continues to be one of the strongest aspects of the business and will expand,” said Ken C. Hicks, president and chief merchandising officer

Total sales were $4.3 billion, down 2.5% from the same period last year. Comparable store sales decreased 4.3%. Net income was $117 million, down 35.7% from the previous year.

The company opened 12 new and relocated stores in the quarter, including 11 in the off-mall format. J. C. Penney operates 1,083 department stores throughout the United States and Puerto Rico.

Source: GlobeSt.

Retailers' 2Q results may not be as bad as thought

Amid the pile of downbeat sales reports for July from retailers, there was a sliver of hope: Second-quarter profits may not be as bad as expected when merchants such as Wal-Mart Stores Inc., Macy's Inc. and J.C. Penney Co. post their results starting this week.

Several companies, from Gap Inc. and Penney to teen retailer Hot Topic Inc., raised their outlooks last week — with help from strict inventory controls and slashing expenses — even as they reported sales declines in July at established stores.

Still, retailers overall are expected to report a fifth consecutive drop in quarterly earnings, according to Ken Perkins, president of research company RetailMetrics LLC. Worries abound about how merchants will stem the erosion of their profits as they confront what could be a deeper spending funk in the critical months ahead.

Among the hardest hit have been clothing stores, which have seen a sales slump worsen in recent months as shoppers buy only what they need. Analysts will be looking for any clues from the earnings reports on when the apparel sector will see a recovery.

The challenge becomes, "how do we drive traffic in a really slow environment?" says Perkins. He expects that his estimate for a 5.7 percent decline in second-quarter profits from a year ago may now be a bit too harsh amid the better outlook many merchants have given. Still, with the economic uncertainty and the cost pressures retailers are facing, he said it's hard to "nail down" a figure.

Nevertheless, the back-to-school season "doesn't look promising," said Michael Appel, a managing director of Quest Turnaround Advisors.

With the benefits of the federal stimulus checks dried up, retailers face even bigger challenges as they try to get shoppers to splurge on skinny jeans and fancy backpacks for their children. Consumers already struggling with high food and gas bills and increasing layoffs are less confident in the economy. And while oil prices have receded a bit, paychecks are not keeping up with overall inflationary pressures on basics.

The reports for July on same-store sales, or those at stores open a least a year, underscored Americans' growing financial strain as shoppers focused even more on buying necessities like detergent and avoided mall-based clothing stores.

Such frugality is creating a wider disparity between low-price operators like Wal-Mart and mall-based chains and department stores. Disappointments in the apparel sector cut across all types of chains from teen retailer Abercrombie & Fitch Co. to department stores such as Penney and Kohl's Corp.

Merchants can't even depend as much on international sales to offset weaker U.S. business as markets in Spain and other European countries are softening as they get dragged down by the slowing U.S. economy.

Analysts will be closely watching Wal-Mart, which has been a beneficiary of the slowing economy but did feel some pain in July. It announced that same-store sales for the month were below analysts' consensus estimates and also predicted slower growth in August. The discounter, considered a barometer of consumers' financial well-being, said that its customers are increasingly unable to stretch their paychecks to the next payday.

That cautious tone caused Mark Miller, an analyst at William Blair & Co., to downgrade shares of Wal-Mart to "market perform" from "outperform" based on expectations for slower sales and profit growth in the second half. In a note to investors, he said that Wal-Mart's July sales performance was a "material deceleration" from the previous two months. Still, he believes the company is on track to meet or exceed Wall Street's current expectations for second-quarter earnings of 84 cents per share when it reports results on Thursday.

Macy's, which no longer reports monthly same-store sales, is expected to post earnings of 19 cents per share when it reports second-quarter results Wednesday, according to Wall Street consensus estimates. Appel said he will be looking for updates on how the company's new efforts to better tailor its merchandise to local areas are faring and whether business has improved at the May Co. stores now converted to Macy's.

Meanwhile, TJX Cos., which sells name-brand labels at a discount, has benefited from shoppers looking for cheaper alternatives than the mall. The company, which is set to report results Tuesday, raised its earnings outlook last Thursday even after reporting that same-store sales fell a bit short of Wall Street estimates.

Source: International Herald Tribune

Stimulus checks, back to school to aid retailers' July

NEW YORK (MarketWatch) -- Retailers' sales are expected to continue to get some lift in July from the last batch of the U.S. government's stimulus checks was mailed and back-to-school purchases increased by aggressive promotions.

U.S. retailers' sales at stores open at least a year in July are expected to rise 2.2%, its fourth straight monthly gain when companies report Thursday, according to a survey of analysts by Thomson Reuters. The gain, pales against a 2.9% growth rate a year earlier as the U.S. economy softened the past year.

Same-store sales are a key retail performance benchmark, because they exclude sales from new and recently closed locations.

The U.S. government's $100 billion-plus in stimulus checks have helped sales in the past three months. Demand also was lifted by clearance sales and other promotions; tax-free holidays in states such as Virginia; and by warmer weather that lifted demand for such items as T-shirts and shorts.

Still, while sales are expected to see a lift, analysts said concerns linger regarding the outlook for the rest of the year, especially after back-to-school shopping is completed in September. Gasoline prices have pulled back, but still are near a record high level that's changed U.S. consumers' shopping patterns and led them to reduce trips to malls and consolidate purchases in one-stop trips.

"Back-to-school happens every year and parents are budgeted for it," said Jharonne Martis, an analyst at Thomson Reuters. "After August there is no back-to-school or rebate checks to boost consumer spending. We will see then how robust the U.S. consumer can be."

Value-oriented retailers in their respective segments, from discounter Wal-Mart Stores Inc. and wholesale club Costco Wholesale Corp. to off-price retailer Ross Stores Inc. and teen retailer Aeropostale Inc. are expected to outperform in their respective segments, analysts said.

Department stores and specialty apparel retailers that sell more discretionary merchandise will continue to be laggards as penny-pinched consumers cut back on clothing and accessories purchases in the face of rising food costs and other economic malaise, analysts said.

While retailers market graphic prints and skinny jeans to excite shoppers, the apparel retailers in general have suffered from lack of a major must-have fashion item, analysts said. To spur shoppers, retailers such as J.C. Penney Co. launched exclusives with designer tie-ups such as Kimora Lee Simmons' Fabulosity. They also have touted value, started their back-to-school season earlier or signed special partnerships on a nationwide scale to draw demand.

"It's a tale of two retail worlds, Wal-Mart and everyone else," said Michael Niemira, chief economist of International Council of Shopping Centers. "Everyone else' is still struggling with the economic environment." Wal-Mart, with its "Save Money. Live Better" tagline, has outperformed its chief discount rival Target Corp. It in July raised its profit forecast after reporting better than June sales at both its namesake and Sam's Club chains. While Wal-Mart expects July sales to rise between 2% and 4%, Target sees its July sales in the range of minus 1% to plus 1%.

While discounters and wholesale clubs are expected to fare better, they also are not excluded from the dilemma retailers face of whether to raise prices to offset rising costs or risk losing market share. Costco, which has been a beneficiary of shoppers making one-stop trips to purchase bulk items at lower prices, in late July warned that its fourth-quarter profit would miss analysts' estimates, hurt by its strategy to hold prices in check to lure shoppers in the face of rising energy and other commodity costs.

Source: MarketWatch.com

JC Penney celebrates latest brand launch in style

NEW YORK (Reuters) - Consumer spending may have slowed and U.S. retail sales are struggling, but the environment has not dampened J.C. Penney Co Inc's efforts to celebrate its latest brand launch in style.

On Tuesday night, the mid-priced department store operator threw a party to introduce Fabulosity, the new fashion sportswear line designed by former runway model Kimora Lee Simmons that will be sold exclusively at Penney for the back-to-school shopping season.

The event, held at a club in Manhattan's trendy Meatpacking district, featured pounding music, free drinks, a rotating disco ball and an appearance by Simmons, as she introduced her new clothing line with a fashion show.

"I really demand that all my divas look fabulous," Simmons told the crowd, but added that shoppers should not have to spend their last dime to look that way.

Fabulosity is one of six new brands Penney is introducing for the back-to-school season -- the largest number it has launched at one go for the start of a new school year.

Back-to-school season marks Penney's second-largest sales season behind Christmas. Penney's sales and profits have been battered this year as middle-income shoppers rein in spending, but the retailer has refused to pull back on plans to introduce new and exclusive brands as it tries to gain market share.

While consumers may be looking to stretch their dollars in the tough climate, Ken Hicks, Penney's president, told Reuters at the event that the retailer has not stepped up its promotions.
"We're not increasing that," he said.

Instead, Penney has increased its advertising and marketing efforts, targeting teenagers in particular, he said.

For instance, this weekend, the retailer is starting its in-theater campaign, in which back-to-school advertising spots will be shown in U.S. movie theaters just before the trailers.

While mall traffic has been falling this year as consumers shop closer to home, Hicks said he is confident teenagers and their moms will head to the mall, where many of its stores are based, to do their back-to-school shopping.

"At appointment times like back to school, the customer is coming to the mall," he said, because it eliminates the need to drive from store to store to finish their shopping.

"The price of gas to go to five different stores is very expensive."

Hicks said he also expects online shopping to play a key role in back-to-school sales, and free shipping offers are crucial to shoppers scouring the web for deals.

The six new brands Penney is launching for the new school season include the denim-inspired Decree brand for girls, the hip-hop feel of Fabulosity and the more preppy American Living for young men.

Hicks said the new brands are catching on with shoppers. "We're already seeing some selling," he added.

Source: Reuters

Penney pins hopes on junior apparel

PLANO – As apparel started taking a back seat to gasoline, food and other necessities early last year, J.C. Penney Co.'s juniors business held up.

Now, the department store chain is trying to preserve its popularity with teen girls and young women, who outspend guys almost 2-to-1, as the back-to-school season begins.

Today, Penney and other major chains report their June sales. Through May, Penney's comparable-store sales have declined 6.6 percent vs. rising 2.3 percent in the same period last year.

Predicting tough times last summer, Penney's buyers did what girls often do.

They went through their racks and found what they did and didn't have.

They were good to go with the All-American girl who lives in her jeans, fleece and sweaters, the edgier one who wants conversational printed T's and the young woman who needs evening dress-up attire.

There wasn't as much for the stylish urban hip-hopper, or the girl after a vintage look with feminine floral small prints and colored camis to layer with her jeans.

Penney believes it can't afford to miss any opportunity with this influential age group, not only because back-to-school is a huge piece of its business (second only to Christmas) but also because the 76 million millennials have the ears of their baby boomer parents and their younger brothers and sisters.

Juniors alone is a $1 billion a year business for Penney, and that slice becomes even more important in a difficult economy.

Teens have emerged as today's "key influencers of purchase decisions made by their families," said Ken Hicks, president and chief merchandising officer for J.C. Penney. While Penney already has a strong relationship with Middle America's youth, it's trying to broaden that connection with more brands to appeal to individual styles and budgets.

Penney says it has the No. 1 market share in junior denim, according to market research firm NPD Group, and is No. 3 overall in juniors, behind Kohl's Corp. and Macy's Inc.

New juniors brands in stores this week, Decree and Fabulosity, were designed to compete with specialty stores ranging from the more traditional American Eagle Outfitters to the trendy Forever 21.

For Fabulosity, its new urban hip-hop brand, Penney executive vice president of women's apparel Liz Sweney went to former fashion model and Baby Phat designer Kimora Lee Simmons to build an exclusive juniors brand.

Penney believes Ms. Simmons gives it instant credibility because she is already a designer that teens want to buy, Ms. Sweney said.

Penney often hears from celebrities who want to partner with the chain, but the "authenticity" isn't there.

"Celebrities come and go," she said. "When we're trying to fill white space in our selection, we can go out and buy it or we have the expertise to create it ourselves."

Decree was created by Penney's in-house design staff. Over the last five years, Peter McGrath, Penney's executive vice president of private brands, has built a team of about 250 people, from textile and color experts to 185 designers who keep fresh Penney's own power brands such as Arizona and Worthington while it develops new ones.

That's what they did with Decree, a more feminine line of tops and bottoms that includes florals, plaids and ruffles in updated colors.

Decree started to take shape last September when Ms. Sweney and juniors vice president John Tighe, along with other trend and design staffers, checked out London's Covent Garden shopping district.

"We held up one clothes hanger after another, asking each other: 'Is this it? Is this it?' " Ms. Sweney said.

"When we all answered yes, every time, we knew what it was," said Mr. Tighe.

Only then could Decree get its personality profile, which is a one- or two-page must-read that Penney requires for anyone who touches a label from creation to store rack. Profiles ensure that all merchandise under one brand has the same point of view, Ms. Sweney said.

Decree and all Penney brands have preapproved models and instructions for their hair and makeup. Nothing about a brand's profile is left to chance, Mr. Tighe said.

Penney's back-to-school marketing campaign hits on a couple of trends. Teens are chummier with their parents than boomers were, said Ms. Sweney. "They're not like we were, calling home from college once a week."

Hence, a campaign was built on a theme they both understand, The Breakfast Club, a 1980s movie that today's teens have adopted into their own pop culture.

In the spots, girls are wearing items from the Decree, Fabulosity, Le Tigre and C7P ... A Chip and Pepper Production lines, while guys are wearing Original Arizona Jean Company, American Living, South Pole and Whitetag apparel. Like the movie, the teens featured in the ads represent various cliques and looks – all available at J.C. Penney, of course.

Source: Dallas Morning News

Retailers already have back-to-school sales on their minds

Summer has barely begun, but retailers are already focusing on back-to-school sales, which are expected to be especially critical this year as consumers rein in spending.

The back-to-school season is the industry's second-biggest selling period after Christmas. And as new fall merchandise starts to arrive in stores this week, competition is expected to be fiercest in the middle market, among chains such as Kohl's Corp., J.C. Penney Co. and Macy's Inc.

Many of their clients, squeezed by high gasoline prices and the weak economy, are turning to discounters like Wal-Mart Stores Inc., with whom the chains can't compete on price. Instead, they rely heavily on unique merchandise and attention-grabbing marketing to attract consumers.

They could face an uphill battle. Sales of back-to-school and college merchandise between July 4 and Labor Day are expected to be flat to slightly lower this year, following a year-earlier increase of 21 percent to $65.7 billion. Some industry research suggests consumers may minimize apparel purchases this year in favor of necessities like textbooks and computers.

Nor is there a clear must-have electronic gadget likely to nudge parents or teens to splurge, says Kathy Grannis, a spokeswoman for the National Retail Federation. That's a switch from the past two years, when gear like cellphones and MP3 players gave back-to-school sales a major boost.

Kohl's hopes to drum up interest by kicking off what it calls its biggest back-to-school campaign ever next week, a week earlier than usual. This month, it will launch an exclusive line of girls' apparel and accessories by singer Avril Lavigne.

The chain's ads will feature celebrities ranging from Lenny Kravitz to teen actress Hayden Panettiere, who recall favorite fashion moments. Kohl's is soliciting similar videos from young shoppers through a contest on social-networking site Facebook.

J.C. Penney is launching five exclusive or private-label brands for back-to-school this month, the largest number it has ever launched simultaneously. "It's a huge time of the year for us, and we're spending against it," says Mike Boylson, Penney's chief marketing officer.

The new lines include Fabulosity apparel and accessories, designed by former model Kimora Lee Simmons, and Dorm Life, a line of home furnishings aimed at college students. To promote the lines, Penney created an online game called "DorkDodge," in which a girl has to navigate a thicket of undesirable boys to get her dream guy. It also plans to air a 60-second spot in theaters recreating scenes from the 1985 teen film "The Breakfast Club," which is having a resurgence.

Macy's is also targeting young shoppers. Next month, it begins filming a documentary that follows five young adults as they roadtrip across the U.S., visiting 12 cities and meeting musicians and music producers -- all while wearing clothing by Macy's American Rag label. The 10-episode show, titled "Ragged Road," will begin airing on YouTube.com in September. It will feature live video blogs.

Source: Daily Herald

Penney's Scales Back Expansion Plans

Once was not enough.

Reacting to the weak retail environment, J.C. Penney Co. Inc. Wednesday again reduced capital expenditures, this time cutting 2009 capex to $650 million from $1 billion and reducing store opening and renovation plans.

But Myron E. "Mike" Ullman 3rd, chairman and chief executive officer, told WWD plans for the rollout of Sephora in-store shops remain intact despite fewer new stores and said Penney's is still upbeat for its back-to-school season.

Investors snapped up shares of the retailer, sending them up 2.2 percent to close at $37.68 on the New York Stock Exchange.

As part of a midyear update, the retailer said it now plans to open or relocate 20 stores in 2009, down from the 36 in 2008, compared with the previous plans to open 50 stores each year through 2011. Plans for its first Manhattan store remain on track, and the company said that unit is "expected to be its highest sales volume location.

"Ullman said the capital expenditure cut to $650 million in 2009 would help the company maintain its "positive free cash flow" next year. The retailer's midyear update is part of its goal in maintaining a level of transparency with Wall Street, he noted. J.C. Penney is also scaling back its store renovation plans to between 10 and 15 units in 2009, down from 20 in 2008, compared with previous plans to renovate 65 each year through 2011. In April, Penney's slashed $200 million from its capex for the year, reducing new and relocated stores to 36 from 50 and renovations to 20 from 65.

Plans for Sephora's rollout haven't been affected, however. "The same number, 50 to 70, [is on track for] next year, except that more of our older stores will get a Sephora store now that we will have [fewer] new stores opening," the ceo stated. "We have 72 Sephora shops now and 20 more will open for the balance of this year. There'll be another 50 to 70 next year, with 20 [located] in the new stores.

"Ullman said Penney's hardest-hit markets coincide with the toughest markets in housing: Florida, Southern California, Las Vegas and Phoenix. J.C. Penney is adjusting by focusing its store opening program on where its customers are located, or at least where Ullman says the emerging community exists. "Most of our new stores are in the South, such as Louisiana, Tennessee, Alabama and five new stores in Texas. We'll open several more next year in Texas," he said.

Ullman doesn't expect additional modifications in the capex plan this year, noting it's still too early to make a call regarding 2010. As for the pullback on store openings, that initiative was taken in conjunction with requests from some developers that are looking to postpone a few projects of their own until 2010 and 2011 due to housing concerns, Ullman said.

Despite the lackluster retail environment and pressures on the consumers' household budgets, Ullman remains hopeful for back-to-school sales.

With seven years of strong back-to-school selling seasons, the retailer knows it is up against tough comparisons, and getting even decent results this year won't be easy, Ullman acknowledged.

"We feel good about our offers, good about our marketing and our pricing proposition....We're well prepared. It's the time of the year when mom has to shop. Most kids need new clothes for back to school," Ullman said.

Although the juniors category has been doing well, and the company will be launching Decree and Kimora Lee Simmons' Fabulosity juniors lines, Ullman said there are also high expectations for young men's.

"Our young men's in American Living has the biggest upside," he said. That category is hitting the sales floor in time for back-to-school, and the ceo said consumers will find the items "very sharply priced compared to the alternatives at the mall.

"Overall, the company is satisfied with early results from the American Living lifestyle collection produced by Polo Ralph Lauren Corp.'s Global Brand Concepts, which it believes could reach sales of $1 billion in three to four years.

"We are satisfied," Ullman said, adding the company expected it would be tougher to achieve the results it's seen so far.

While a few Wall Street analysts have criticized the higher price points for American Living, Ullman emphatically said the collection is "not inappropriately priced for what it is," adding that in a booming economy it likely would have been easier to get even better results.

Sales in apparel categories have been good, which "bodes well" for fall, Ullman noted, boasting too that the retailer had its best women's apparel business last fall. Women's apparel sales are doing very well this month, Ullman said. Casual sportswear was the top category in women's apparel, followed by the junior business and plus sizes. Career has also had a "positive" trend.

"We feel good about our women's business," Ullman said.Sales in the home business and fine jewelry categories have been difficult, but also usually entail higher-ticket purchases. The retailer expects total inventories to fall below 2007 levels by the back-to-school season, and plans to align inventory levels with sales expectations.

Penney's has endured declines in comparable-store sales in each of the first four months of the current fiscal year. May's were off 4.4 percent following declines of 1.7 percent, 12.3 percent and 6.7 percent in April, March and February, respectively.

When Penney's released first-quarter results in May, it said it expected comps to decline in the midsingle digits during the current second quarter. First-quarter earnings dropped 49.6 percent to $120 million as sales declined 5.1 percent to $4.13 billion, and dropped 7.4 percent on a same-store basis.


Reacting to the revised plans, Citigroup retail analyst Deborah Weinswig wrote, "This news was consistent with our expectations [and] demonstrates disciplined and prudent planning on the part of JCP's management team.

" She reiterated her "buy" rating on the retailer.The news from Penney's helped the Standard & Poor's Retail Index rise 1.4 percent to 374.46, while the Dow Jones Industrial Average remained steady, gaining 0.04 percent to 11,811.83. The S&P 500 rose 0.6 percent to 1,321.97.

In the department store sector, Macy's Inc. rose 3.2 percent to $20.02, Sears Holdings Corp. advanced 1.1 percent to $74.44 and Kohl's Corp. gained 2.3 percent to $42.05. Discounter Wal-Mart Stores Inc. jumped 1.4 percent to $58.12.

Among specialty retailers, The Talbots Inc. finished up 8 percent at $12.89 and landed on the New York Stock Exchange's list of top 30 advances. AnnTaylor Stores Corp. climbed 3.1 percent to $25.57, J. Crew Group Inc. jumped 4.1 percent to $34.59 and Gap Inc. rose 0.8 percent to $16.89.

Source: Women's Wear Daily

Big Push for Penney's: Retailer Aims to Rule Juniors With New Lines

At J.C. Penney, the approach to back-to-school is anything but academic.

Next month, in a concerted and aggressive push to become hipper and shore up some merchandise holes, the chain will roll out and market four exclusive youth-oriented brands — in juniors, private labels Fabulosity and Decree, and Le Tigre, and in young men's, American Living. The company will also start selling WhiteTag in young men's.

Juniors, along with accessories, dresses and contemporary apparel, is among the few clothing categories Continued from page one that hasn't cracked under the weight of the poor economy. It's a $1 billion-plus business at Penney's and a standout there for several years. Last year, juniors posted the best gains at the Dallas-based department store chain, and did well through Christmas.

Penney's quotes statistics from NPD, the Port Washington, N.Y., market research firm, indicating the retailer has the nation's biggest market share in junior denim, and the third biggest share of the junior market overall, behind Kohl's, the industry leader, and Macy's.

"We are looking at building on our strength," Liz Sweney, Penney's executive vice president of women's, said in an exclusive interview. "Juniors is a significant growth opportunity.

"The goal is not to be third," Sweney added. "The goal is to surpass those players out there."

Asked if Penney's ever unfurled five labels in the same season, Sweney replied: "I've been at Penney's for eight-and-a-half years and in my time, we've never done it."

For Penney's to sustain its momentum in juniors, the marketing is critical, and becomes increasingly challenging, considering the greater complexity of the offering and the need to make the messaging clear so each label projects its own character and brand image. Penney's declined to provide details of the marketing campaign, which is being planned, or how juniors is faring after last year's success. With the product development and marketing organizations in high gear, it's clear the team is anxious to score big again, though the pressure is on, considering that comparisons will be tough against last year's store gains and this year's deteriorating retail climate.

They are conditions far from ideal for such a major rollout of new lines, given declining same-store sales at many retailers, spiraling gas and food prices and rising unemployment. Myron "Mike" Ullman, Penney's chairman and chief executive officer, has described the retail environment as among the worst he's seen in his 35-year career. Of course, executives and analysts have said newness is the key to grabbing market share in good or bad times.

According to some analysts, Penney's also needs to capture more of the cool factor that certain specialty chains have, notably Abercrombie & Fitch and Hollister. "It's tough for J.C. Penney to be edgy enough to catch the fickle junior consumer," said Russell Jones, a director at restructuring and advisory firm Alix Partners, which recently conducted a consumer survey on shopping preferences. "They are always interested in being cool, and cool is usually associated with something new that hasn't been on the landscape forever."

"We're seeing that the junior market is becoming increasingly influenced by value and fashion. [Juniors] want both," said Marie Driscoll, director of Standard & Poor's retail equity research, noting that Penney's offers these things. "The only thing that J.C. Penney doesn't have to the same degree as the vertical brands in the mall is the coolness factor, but definitely their denim is cool."

Even though juniors has less discretionary income than when the economy was better and there were more part-time jobs, the market remains very brand driven, Driscoll said. However, she added that Penney's could be getting some, but not many, shoppers who are trading down from specialty players in the mall.

B-t-s at Penney's officially kicks off July 10. That's when Fabulosity, Decree and WhiteTag, along with the young men's component of American Living, developed by the Global Brand Concepts division at Polo Ralph Lauren, will be set on the selling floors. Le Tigre has been in Penney's stores since April, and the retailer has begun selling American Living in the men's, women's, home and children's categories. The season runs through Labor Day.

In terms of volume, "back-to-school is not more important than Christmas. But it's a core competency at Penney's, and a very important part of the year — probably more so than typical department store competitors," Sweney said.

The upcoming b-t-s program, said John Tighe, Penney's vice president for juniors, represents "an evolution of what's been going on for years" at the chain rather than a strategic shift. "We have a very good teen junior business, and strong market share."

For juniors, Penney's has adapted its three-year-old merchandising approach targeting four lifestyles: conservative, traditional, modern and trendy, and three price tiers: good, better, best. It's designed to fill voids in the assortments and already has been implemented extensively in the women's and home areas.

"It's a very, very strategic methodology to determine what brands we need in our assortment," Sweney said.

Penney's juniors department now targets four lifestyles, which are:

- All-American, considered the lifestyle with the widest appeal and driven by denim, fashion knits, fleece and sweaters. The key brands are The Original Arizona Jean Company, Levi's, Flirtitude, C7P...A Chip and Pepper Production, Le Tigre, which is owned by Kenneth Cole Productions, and Decree.

- Fast Track, for trendy fashion denim and "conversational" prints, represented by Fang, Underground Soul, Self Esteem and Vigoss.

- Dressy/Going Out, for evening and work clothes, including dressy separates for special occasions and the brands B Wear, Tracy Evans, Heart and Soul and Star City.

- Urban, which targets fashionable hip-hop styles including Southpole and Fabulosity by Kimora Lee Simmons.

"A few years ago, we were really 'Mom's store,'" Sweney said. "But with all the initiatives over the last few years, we are becoming much more relevant. Many teens really look to us. They might shop the mall to come up with style ideas and then she comes to Penney's to get style with great prices. We are [no longer] Mom's store. We are very relevant to the teen style."

According to Penney's executives, where teens go, adults follow. "Through our research, we found out how influential the teen is in the household. Teens today are much more influential on the spending than ever....They're really style advisers for their family," said Tighe.

What's critical to making juniors click is the production cycle and flowing the goods in so there's constant newness. Penney's says its production cycle time in juniors, from the time the goods are designed to when the customer can first buy them, has been reduced to 17 weeks from 52 weeks three-and-a-half years ago. Also, there's an improved flow, with key items coming in weekly.

Decree will be the lead label in the juniors department, and could be among the top brands at Penney's, with Arizona expected to maintain its top position as the biggest in-house label.

While Arizona is collegiate, preppy and item-oriented, Decree will offer layering, feminine details and a greater sense of individual style and outfitting. Decree will fall into Penney's better tier, with prices from $18 for a tank top to $38 for a five-pocket pair of jeans and $85 for outerwear. There also will be a separate Decree "accessory zone" to round out the outfitting, as well as signature fixtures, denim tables, lifestyle graphics and a platform of three mannequins. "It's a full teenage-girl brand, head-to-toe," Sweney said.

Fabulosity takes a more opulent, urban and evening approach, with a lot of gold looks and animal prints, and T-shirts, knit tops, sweaters, jeans, skirts, dresses, hoodies, jackets and outerwear. With items ranging from $29 to $108, Fabulosity falls into the retailer's best pricing tier. There also will be huge pictures of Kimora Lee Simmons, the celebrity behind the label.

Penney's perception of teens, which executives point out is based on research, seems more Richie Cunningham than James Dean. "The most interesting thing about teens is that they are really very close to their parents," Tighe said. "Seventy five percent like to do things with their parents, and kids want to succeed. They are very much into being successful. There isn't a rush to disassociate from their parents."

Ken Hicks, Penney's president and chief merchandising officer, takes the point of view one step further. "Teens have always been a cornerstone of our business," he said. "And they are emerging as today's key influencers of purchase decisions made by their family."

Source: Women's Wear Daily

Wal-Mart and Penney roll out casual furniture

Wal-Mart's new Canopy and J.C. Penney's new Linden Street home furnishings brands don't have the name recognition of an Ikea or a Pottery Barn, but they're going after the same customers.

Last month, Wal-Mart Stores Inc. mailed shoppers a 33-page Canopy catalog and launched the Web site www.canopyliving.com.

Online, the find-a-store function leads shoppers to Wal-Mart locations.

The catalog notes that items delivered to Wal-Mart stores have free shipping.

The Wal-Mart name scarcely appears, by design. The company says it's trying to create a brand identity for Canopy, a line of ready-to-assemble furniture, bedding, rugs, lighting, dinnerware and table linens.

Penney created Linden Street because it noticed customers were gravitating to its simpler furniture, window coverings and bedding.

They were buying comfortable everyday furniture. The emphasis was on function with some fashion, but not so ornate.

Analysts say the two retailers are launching modestly priced furniture lines this summer to satisfy a shift that's been coming for some time.

Even before the housing downturn put home furnishings retailers in a spiral, Americans were migrating to a more casual style and lower prices for furniture.

Penney's and Wal-Mart's moves signal a recognition that the furniture industry has to "find ways to attract a new generation," said Jerry Epperson, a longtime furniture analyst for investment banking firm Mann, Armistead & Epperson.

"They aren't going to do it selling $5,000 to $10,000 dining room and bedroom suites," he said.

"Younger people are buying items, not suites, and they want them to be practical and functional."

Smaller living spaces, younger households and the desire for everything to be both functional and fashionable have led consumers to ready-to-assemble furniture and modestly priced pieces that will move from first apartment to family room.

Ikea, now in 33 U.S. markets, gets credit for showing the way. Others say it goes deeper than that.

If we're comfortable buying clothes at Target and wedding dresses at J. Crew, why not buy a sleigh bed from Wal-Mart or a candlelight chandelier from J.C. Penney?

Shifting tastes

There's "a very real shift" to less expensive furniture, said Nick McCoy, furniture analyst at TNS Retail Forward.

Even before the economic headwinds, Retail Forward's shopper surveys found a mindset toward changing furniture more often, rather than buying and sticking with heirlooms.

Crate & Barrel recognized the shift a few years ago and created CB2 to compete with Target and Ikea.

While Wal-Mart's and Penney's timing may seem awful, Mr. Epperson said it's excellent.

Whatever product is on the floor when the economy turns will get the attention of shoppers, he said.

Every city has had independent furniture stores that have gone out of business.

Major specialty furniture chains from Pottery Barn to Restoration Hardware are hurting in this downturn, but they have loyal customers.

Whether their shoppers gravitate to a Penney or a Wal-Mart remains to be seen, Mr. McCoy said.

"Still, everyone should be paying attention to cross-shopping. People may at least try it out with a piece or two," he said.

Price and function are the hooks.

"Ikea is one of the most successful in recent years, and they are a lower-price retailer," Mr. McCoy said. "Linden Street and Canopy are lower-priced, too, but these days everything is competing with gas pumps and grocery stores."

Jeff Allison, Penney's executive vice president for home, said that although the furniture business is tough, "we're in it and we're going to continue to be in it."

Linden Street is in 30 home categories, and he expects that window coverings and items that people can replace easily will initially do best.

"We'll be cautious with the furniture part of it," he said.

To get Linden Street's larger pieces into stores that don't have furniture departments, Penney will use the merchandise instead of store fixtures.

It will set up beds, nightstands, rugs and lamps in the bedding department to display sheets and comforters.

Signs will let shoppers know the furniture is for sale, too.

Linden Street

Penney's in-house design team created Linden Street.

The theme is simple, with two wood finishes – pine and cherry – and three colors for slipcover sofas. Lots of function is built in, such as an electrical outlet hidden in a nightstand.

Steve Castella, vice president in product development for soft home goods, said the creative team looked at what was missing from Penney's furniture offerings when it formulated a new lifestyle brand.

Those items matched with individual pieces that online customers were buying: "less formal, done-up, embellished and more monochromatic," said Deb Schweiss, J.C. Penney home trend director.

Then the team focused on how people live, said Kevin Rooney, vice president in product development for hard goods.

"People take their laptop to bed and don't want to crawl behind a bed to plug it in. There are different sizes of dining rooms, so we came up with the modular storage units," he said.

Price was an overriding issue, he said. Linden Street is priced at Penney's opening and midprice levels.

Canopy

Wal-Mart is already the largest U.S. seller of furniture, but it's better-known for dominating grocery, toy and many other categories.

It's trying to broaden the appeal of its home furnishings with Canopy and will add Better Homes and Gardens products this fall, Wal-Mart spokeswoman Tara Raddohl said.

Unlike Penney's new brand, Canopy is ready-to-assemble furniture with "friendly" instructions available online.

Only about 15 stores, mostly in the Southeast, have vignettes set up.

Catalogs are available in all home departments.

Source: The Dallas Morning News

Penney Cuts Store Openings

PLANO, TX-Expecting no pickup in the economy any time soon, J. C. Penney Co. has cut its planned store openings for 2008, executives said at the company’s first quarter conference call. Plans now call for 36 new stores this year, down from the 50 originally planned, said Ken Hicks, president and chief merchandising officer.

Plans call for 20 units to be renovated, down from the 65 renovations completed last year. “We don’t anticipate any significant change in consumer demand in the second quarter,” Hicks said. “While the stimulus package is a positive, its benefit will be short-lived.”

Nor will next year be better.

“In terms of 2009, we know we need to make decisions in the next 60 days. But it will be unlikely that [the number of new stores] will be as high as 36, given what we know today,” said Myron E. (Mike) Ullman III, chairman and CEO.

Net income for the quarter decreased 49.6 percent to $120 million. Total sales decreased 5.1%. Comparable store sales decreased 7.4%. J. C. Penney operates 1,074 department stores throughout the United States and Puerto Rico.

Source: GlobeSt.

J.C. Penney sees any tax-rebate boost short-lived

CHICAGO, May 8 (Reuters) - Department store chain operator J.C. Penney Co Inc (JCP.N: Quote, Profile, Research) said on Thursday that tax-rebate checks coming to consumers as part of the U.S. economic stimulus plan may provide a modest sales boost, but that any impact will be short-lived.

The company also said it sees no clear indication that U.S. economic conditions will improve in the near term and it remains cautious in planning for the second half of the current year.

The comments were made in a recorded message about the company's April sales results. (Reporting by Brad Dorfman, editing by Gerald E. McCormick)

Source: Reuters

Revitalized J.C. Penney aims for middle class

Smaller stores, private labels help retailer stay competitive

At JCPenney, women can buy sleek, conservative styles that are suitable for the office. Teens can find colorful lingerie and distressed T-shirts made from recycled materials.

At some of the company's newest stores, shoppers can pick up Dior lip gloss or a designer fragrance by Marc Jacobs at a Sephora cosmetics ministore near the registers.

It's a far cry from the J.C. Penney of a few decades ago, when even some employees rejected the store's stodgy styles.

"It used to be Penney's was just my mother's brand," said Jo Faust-Jones, store manager of the JCPenney at Tempe Marketplace, who has worked for the company for 30 years.

"Now we have a whole new direction.

"Fashionistas might quibble with any description of JCPenney's brands as cutting-edge.

Nevertheless, the 106-year-old retailer lately has been hitting the bulls-eye with clothing and home furnishings that appeal to its target market: Middle America.

Faust-Jones says the store's typical customer is a woman aged 35 to 54 with an annual income of $35,000 to $100,000. The company also is making efforts to appeal to younger shoppers. This summer, it plans to introduce private label lines of colorful dorm room furnishings called Dorm Life and back-to-school wear by designer Kimora Lee Simmons called Fabulosity.

Successful turnaround

Like Sears, Roebuck and Co. and most department stores, J.C. Penney has struggled financially in the past year as consumers have cut spending.

Still, Steven Hoch, marketing professor at the Wharton School of the University of Pennsylvania , views J.C. Penney's turnaround as one of the most successful in recent memory.

"J.C. Penney had to retrench and reposition," said Hoch, who directs Wharton's J.H. Baker Retailing Initiative. "It was long and painful. The stores are significantly smaller than they used to be. But it has succeeded in becoming a moderately priced department store that offers good value."

As recently as the 1990s, J.C. Penney's business model was similar to that of Sears. J.C. Penney tried to sell a little of everything, including major appliances. It also owned unrelated businesses, including a bank and several drug stores.

"We tried being all things to everyone, and we lost our identity," said Faust-Jones, who, in addition to being a J.C. Penney manager, wrote about the company for her University of Phoenix master's degree project.

"So we went back to our roots."

Retailing experts now consider Kohl's and Target to be J.C. Penney's main competitors.

'Off-mall' stores

A return to its earlier focus on selling apparel and housewares also has made it easier for J.C. Penney to develop its new "off-mall" stores, such as those at Tempe Marketplace and Promenade at Casa Grande.

Since 2003, the company has focused on developing hipper, single-story, 100,000-square-foot stores with shopping carts and large parking lots for shoppers who want to run in and out of the stores quickly.

Sharon Cox of Mesa for instance, rushed into the Tempe Marketplace JCPenney before lunch on a weekday for a skirt to wear at the office. She wanted something long enough to cover her calves.

In less than 30 minutes, Cox left with five new skirts.

"A friend of mine told me I could find what I was looking for here," Cox said.

"Price is an issue, and so is quality. I knew I could find quality here."

Six JCPenney stores in Arizona powercenters are in the off-mall format. They are in Ahwatukee, Casa Grande, Goodyear, Lake Havasu City, Tempe and Yuma. A seventh is planned to open in Tucson later this year. J.C. Penney's typical enclosed indoor-mall store is double the size and, in some locations, lacks the quick access of the off-mall stores. "From the whole list of old department stores that have been in enclosed malls, J.C. Penney has done the best of re-merchandising and re-branding itself," said David Malin, senior project manager for Vestar, the Phoenix-based company that built Tempe Marketplace.

"It's fresh, it's contemporary, and it fits in with the lifestyle we try to create."

Todd Chester, principal with WDP Partners, gave similar reasons for why his company recruited J.C. Penney when it co-developed the Promenade.

"J.C. Penney already had a loyal following. Then it recreated itself in the last five to six years," he said. "The new format is phenomenal."

Customer-service focus

J.C. Penney had planned to open 50 new stores nationally this year but has scaled back to 36.

The company's 2007 annual profit was $1.11 billion, down 3.5 percent from the $1.15 billion the stores earned in 2006.

Yearly same-store sales were flat when compared with those of 2006. And company officials say they do not expect sales to pick up during the rest of this year."I don't think I've seen an environment as unpredictable as the current environment," said company Chief Executive Officer Myron "Mike" Ullman III at a meeting with investment analysts last month.

Two things J.C. Penney won't cut back on, officials said, are the development of new labels and customer service.

By year's end, the stores are expected to roll out several new brands. J.C. Penney also has started a new "customer first" service program that, among other things, allows employees to drop whatever they are doing to assist customers who need help in finding what they came to buy.

J.C. Penney scores well in a national survey of customer satisfaction established by the University of Michigan. It tied with Target in the American Customer Satisfaction Index's latest ranking of department and discount stores.

But in a weak economy, Faust-Jones said, J.C. Penney needs to try harder."We compete with two other shoe stores here" at Tempe Marketplace, she said. "The only thing we have to offer that is different is customer service. We try to make sure everyone leaves with a purchase."

Source: The Arizona Republic

JCPenney Introduces Linden Street

Expansive New Neo-Traditional Brand Bolsters Company's Home Assortment; Offers Customers All the Comforts of Home with Its Casual, Inviting and Functional Style

PLANO, Texas--(BUSINESS WIRE)--Leveraging its competency in developing, designing and marketing powerful private brands, J. C. Penney Company, Inc. (NYSE: JCP - News) today announced the launch of a new private brand of home furnishings and accessories called Linden Street. The launch of Linden Street signifies JCPenney’s continuing commitment to deliver style and quality at a smart price through brands that create an emotional connection across its customers’ lifestyles. The most comprehensive Home brand launch in Company history, Linden Street will be available in-stores, online on jcp.com and via catalog beginning in July.

Offering all the comforts of home, Linden Street is a neo-traditional brand that includes contemporary interpretations of classic design, providing a casual, comfortable and inviting style with today’s young families in mind. Built on standard pieces that can be personalized and updated throughout the seasons and years, Linden Street’s décor provides a lived-in, relaxed look, transforming homes into a cozy retreat. The collection balances both masculine and feminine attributes and is perfect for entertaining friends and family without formality.

Additionally, features built into the furniture such as hidden storage, electrical outlets and charging strips – for PDAs, iPods and more – add functionality to the collection – an aspect that is increasingly sought after by today’s consumers.

“There’s no better way to make an emotional connection with our customers than to help them create a home that truly reflects their personal style. Linden Street blends the best of traditional and contemporary designs with eclectic components, offering customers a lifestyle assortment that will evolve with their home throughout the years,” said Jeff Allison, executive vice president of home for JCPenney. “Never before has an initial brand launch in Home included such a holistic approach to serving our neo-traditional customers’ lifestyle preference – it’s a testament that we believe this exciting new lifestyle brand will truly resonate with our customers.”

Designed, developed and sourced in-house, Linden Street joins JCPenney’s array of good/better/best priced lifestyle offerings in Home including: The JCPenney Home Collection for the conservative and traditional lifestyle customer; Chris Madden; Chris Madden Hotel; and the exclusive brand, American Living, for the traditional lifestyle customer; and Studio for the modern lifestyle customer. With its harmonic blend of traditional and contemporary styles offering a classic, timeless design, Linden Street will fill a neo-traditional lifestyle niche within JCPenney’s Home assortment.

“With 45 percent of our annual revenue coming from our private brands, Linden Street is yet another exciting addition to our robust portfolio of private brands, which continue to address our customers’ diverse lifestyle needs and deliver above average gross margin to the business,” said Ken Hicks, president and chief merchandising officer for JCPenney. “This expansive new brand delivers on an important – and currently underserved – customer segment while broadening our Home offering, allowing us to expand our appeal and relevancy to customers with various needs, tastes, aspirations and budgets.”

Added Hicks, “During this challenging economic environment, our objective is to continue to innovate, ensuring that when customers are buying for their homes, they do it at JCPenney.”

Linden Street will feature a complete line of bedding, bath, window coverings, area rugs, lighting and decorative accessories, along with furniture for all the rooms of the house. All colors, fabrics and textures coordinate to create a unique and personalized style, while furniture features both pine and cherry finishes. Linden Street will fall into JCPenney’s good and better pricing categories with retail prices ranging from $40-$400 for bedding; $40-$50 for window drapery; $100-$380 for lighting; $30-$400 for area rugs; $14 for bath towels; $19.99-$300 for decorative accessories; $7.99-$199.99 for tabletop; and $1,399-$1,959 for furniture.

Source: J. C. Penney Company, Inc.

Penney moderates 2008 growth plans

NEW YORK -- J.C. Penney Co. officials are expected to offer investors more details Wednesday about how the department store operator will balance a moderated store growth strategy with an accelerated push for more exciting merchandise to attract frugal shoppers.

Chairman and Chief Executive Myron "Mike" Ullman III said late Tuesday that the company is stretching out its five-year store growth strategy because of the economic downturn, with plans to open 36 new stores this year instead of the 50 it had projected. It also aims to renovate 20 units this year, instead of the planned 65.

But Ullman also told analysts that the company plans to accelerate its merchandising innovation. Penney this week announced several new lines for teens, along with the launch of a new store brand of home furnishings and accessories called Linden Street.

Ullman's address, which kicked off a two-day analyst meeting, came as Penney and other retailers have stumbled in the face of a consumer spending slowdown amid higher gasoline prices, slumping home prices and a drop in consumer confidence. Penney slashed its first-quarter profit outlook last month, and last week the retailer reported a larger-than-expected 12.3 percent drop in same-store sales, or sales at stores open at least a year, for March.

Ullman told analysts that Penney is taking "a hard look" at 2009 and will figure out its store growth plans for next year in July.

The cautious mood at the analyst meeting was different from the investor session only a year ago, when the company said it planned to open 250 new stores over the next five years and predicted its earnings per share would grow at a 16 percent compound annual rate from 2008 to 2011. Penney executives are slated to offer a financial update Wednesday.

Ullman told investors that what's most challenging about this economic downturn compared with other past slowdowns is that it has been so "unpredictable." Consumers, he said, are faced with much uncertainty in the housing market. Meanwhile, shoppers are confronted with a lot of volatility in the financial market.

Ullman also pointed to how the overall economic slowdown is hurting some markets more than others. For example, Phoenix, Las Vegas and Tampa, Fla., have been among the hardest hit, while markets like Texas and Manhattan have seen stability, he said.

"We think it's going to take awhile before it gets predictable," Ullman said.

Amid such economic uncertainty, Ullman believes that Penney is stealing some market share away from other rivals. He said its American Living collection - a partnership with Polo Ralph Lauren that marks the biggest launch in the store's history - has been well received, though some merchandising categories are doing better than others.

Source: Miami Post

JC Penney focused on winning sales from teens

NEW YORK (Reuters) - J.C. Penney Co Inc (JCP.N: Quote, Profile, Research) is adding new brands and updating the look of its junior's and young men's departments as the mid-tier department store operator tries to win sales from teenagers during the upcoming back-to-school shopping season.

Penney said on Monday it will launch a new private brand, called Decree, for teenage girls and young women, while it will introduce two new brands, American Living for Young Men and Whitetag, in its young men's department.

"Teens have always been a cornerstone of our business, and they are emerging as today's key influencers of purchase decisions made by their family," Ken Hicks, president and chief merchandising officer, said in a statement.

Given the increasing importance of this segment, he said Penney was adding the brands to meet teenagers' diverse tastes.

The announcement comes one day before Penney is scheduled to hold its annual meeting with Wall Street analysts and provide an update on its business, which is faltering as shoppers reduce spending in the wake of the economic slowdown.

Penney's sales at stores open at least a year, a key retail gauge known as same-store sales, have fallen in every month since November, when it posted a gain of 2.6 percent. It has forecast another decline for April same-store sales.

The back-to-school shopping season could be a crucial one as struggling U.S. retailers looking to boost sales, and attract shoppers with extra cash in their hands from tax rebate checks.

Penney said the Decree brand will offer "sophisticated apparel, accessories and footwear," with a heavy emphasis on denim. The items will range from $18 for a tank top to $38 for a pair of 5-pocket jeans to $85 for outerwear.

American Living for Young Men is a brand developed exclusively for Penney by Polo Ralph Lauren Corp's (RL.N: Quote, Profile, Research) Global Brand Concepts division. It will feature denim, polo shirts, and T-shirts, while Whitetag, a national brand, is described as an "urban rock" inspired collection.

Penney also said it is adding new fixtures and graphic images to its juniors and young men's departments.

It said that in its new, "off-mall" stores, or stores being built away from malls, there will be newly designed dressing rooms with flat screen televisions and sitting areas.

Source: Reuters

Bad Penney

Last year, J.C. Penney had plenty to brag about. It beat annual earnings expectations, partnered with chic cosmetics retailer Sephora and introduced hip new brands, like C7P, from high-end denim designer Chip & Pepper.

Even more ambitious were plans for the roll-out of American Living, a private-label brand from a division of Polo Ralph Lauren. Penney's biggest launch ever, it would arrive in about half its stores in early 2008. The retailer would open 250 new locations over the next five years, including its first store in Manhattan sometime in early 2009.

So much for ambition. Thanks to a weakening economy, lower consumer confidence numbers and softer sales, the retailer reported negative comparable-store sales for the last three months. The company pulled back on store growth plans in February, saying they would open only 36 stores this year instead of the 50 originally planned.

Friday, Penney lowered its first quarter profit forecast, saying it now anticipates net income of about 50 cents a share, down from its prior forecast for profit between 75 and 80 cents per share.

"We expect the continuation of a difficult environment over the course of 2008," said J.C. Penney Chief Executive Myron Ullman, in a statement.

As for the big brand plans, they're not helping--not in a tough economy. "Sephora [shops] within Penney's stores are definitely traffic drivers, but neither J.C. Penney nor Sephora have detailed how the profitability is split between stores," said Bill Dreher, a senior retail analyst for Deutsche Bank.

"As for American Living, its prices are 25% higher than all of Penney's other merchandise," Dreher points out. "In the consumer environment we're facing now, shoppers are trading down price points for purchases in apparel and home."

J.C. Penney began opening Sephora outlets in fall 2006, and today, about 70 Penney locations have the in-store boutiques. During the holiday season, Sephora boutiques were "one of the best-performing areas of the store," according to company spokeswoman Rebecca Winter.

Cosmetics and personal care, of course, are less subject to promotional margin pressure than other high-margin categories, such as apparel and home, observers say. Penney's problem is that only about 6% of its stores have a Sephora inside. Most of the company's new stores will have a Sephora boutique, Winter said. Still, this will bump up the percentage of stores with a Sephora shop to just 9%.

"As far as I can tell, Sephora has no material impact on profits or earnings," Dreher said.

American Living, which landed in 600 Penney stores in February, has also caused some concern among retail analysts. The brand, designed by the Global Brand Concepts division of Ralph Lauren, spans 40 home and apparel categories; in the long term, Penney's expects it be a billion-dollar idea, Winter said. But Penney significantly discounted many items right after they arrived in stores, a move Winter said had been planned in advance.

"Just about everything was marked down a minimum of 30% the week the program landed," said Carol Spieckerman, president of newmarketbuilders, a retail consulting firm. "I believe they are risking an early loss of credibility for a program that promised to build the top end of Penney's. Beyond that, they are providing early 'wait-to-buy' training for brand loyalists."

That is, if these potential brand loyalists ever figure out that the brand comes from Polo Ralph Lauren. The fact that the designer's name does not appear anywhere in the brand's name, merchandise or high-profile advertising could also hurt, Dreher said.

"It's two words right now, it's not a brand yet," Dreher said. "At this stage, I just don't believe consumers have any reason to buy it."

Beyond that, the Ralph Lauren deal may prove a distraction from the real goal: selling more higher-margin clothing and home goods. Based on consumer research, the company will have to upgrade its store experience significantly for consumers to believe American Living is a brand from Ralph Lauren, brand experts say.

J.C. Penney still ranks third, behind Macy's and Sears, in department-store customer loyalty, said Dr. Robert Pasikoff, founder and president of Brand Keys, a brand and consumer loyalty consultancy.

"Despite everything J.C. Penney has done [in recent years] to upgrade [its] image, consumers haven't bought it yet," Pasikoff said. "They definitely don't think J.C. Penney has anything to do with Ralph Lauren."

Source: Forbes

Kohl's and JCPenney Will Make You Cry

When it comes to TV commercials, I don't have the time. I'm off to grab a snack, fold laundry--anything but watch 30 to 60 seconds of someone telling me I can't live without their product or service. But lately, two apparel retailers have been stopping me dead in my tracks, as I stare at the television in absolute awe. The new Kohl's commercial actually stopped me mid-bite. And nothing gets between me and my food. Until now.

Soft blue colors, gorgeous clothes, Ben Lee crooning "We're All in This Together" drew me in. Suddenly, I had chills. My eyes misted with tears. I wasn't being told to buy anything, I was being invited into a lifestyle where the sky is perfectly blue, the hair is neatly coiffed and the clothes are worn effortlessly (and don't even need to be pressed!). Little children giggle, and the adults are at ease. I want to live there! Thankfully, via YouTube, I can watch this masterpiece again and again.

JCPenney's American Living commercial elicits the same kind of response from me. I can't even talk when this commercial comes on--I shush everyone in the room. It's more subtle than the Kohl's ad, because I don't even notice the clothes. Yeah, it looks a bit like summer in the Hampton's (very Ralph Lauren), but the rest reminds me of growing up, falling in love and laughing with my family. And how cute is the little girl in the red boots stepping on her birthday cake? I mean, seriously. By the end, I'm pulling out the Kleenex. I'm sure Alison Krauss and Robert Plant's version of "Killing the Blues" isn't helping. Don't believe me? Check out YouTube and you'll also find yourself suspended in time, smiling and covered in goose bumps.

Pure genius. Kohl's and JCPenney are employing the same tactics that have made Apple and Nike successful for so long--using a combination of beautiful imagery and music to sell a lifestyle (that just happens to be donning their product). I'm convinced that the success of these commercials is all in the song choice, because it dramatically takes you to whatever you're being shown visually.

Yay Kohl's and JCPenney! I would love to see more retailers employ these advertising methods-- it's not about sales and shoving a product down someone's throat; it's about making people feel something so overwhelming that they can't help but fall in love with your product. And then, tell everyone about it. In a blog.

Now, if you'll excuse me, I'm off to shop at my two new favorite stores...

Source: Retail Design Diva