(CNN) — Marc Rosen didn’t flinch when he was offered the top job at JCPenney last year.
A stalwart of twentieth-century retail for middle-class Americans seeking affordable clothing and home furnishings, JCPenney has struggled for more than a decade and fell into bankruptcy shortly after the Covid-19 pandemic in 2020.
But Rosen, a retail veteran who previously worked at Walmart and Levi’s, said he “did not have any personal hesitancy at all” about trying to revitalize the 120-year-old brand and protect JCPenney from extinction like Barney’s, Lord & Taylor, Century 21 and other shuttered retailers.
“I believe in taking on large scale transformation,” Rosen, 54, told CNN Business in a video interview this month. “There was an opportunity to really take this brand and make it relevant again.”
Rosen is staking his turnaround plan on appealing to “America’s diverse working families.”
The typical customer at JCPenney has a median household income of between $50,000 to $75,000. Roughly 30% of the retailer’s customers are Black, Indigenous and people of color, according to the company, a larger share than many competitors
So JCPenney is chasing these shoppers with an overhauled beauty strategy after a long partnership with Sephora ended. It has remodeled stores and added new major brands and private-label clothing and home furnishings’ labels. The company has also improved its technology and online experience to draw more online sales. Just a quarter of JCPenney’s sales are online, trailing rivals.
Rosen said customers now are shopping at JCPenney more frequently, the first time that has happened for the brand in years, and it’s regaining market share in key departments such as home goods. (JCPenney does not break out sales publicly.)
But there are signs of pressure: visits to all JCPenney stores were down 29% as of October from the same time a year ago, according to data from Placer.ai. In October, traffic to JCPenney’s website increased only 1.26% from a year ago, according to data from SimilarWeb.
Now, a year into Rosen’s tenure, he faces his biggest test at JCPenney yet: the holiday shopping stretch. And it comes at an uncertain moment for the US economy and shoppers.
The company said it’s off to a strong start to the holiday season. But JCPenney’s main customers are feeling strained by the highest inflation in 40 years and they have shown signs of pulling back on discretionary goods— the bulk of what JCPenney sells.
Rosen also has to dig out from years of mismanagement and failed strategies at the company.
The company faces unrelenting pressure from much larger retailers such as Amazon, Walmart and Target. TJX, the owner of TJMaxx and Marshalls and other “off-price” retailers that have undercut the department stores’ model by selling designer brands at bargain prices.
“The future is going to be a challenging one because it’s difficult for department stores to navigate, even under the best circumstances,” said Erin Schmidt, a senior analyst at Coresight Research, a retail advisory and research firm. “The competition is really fierce.”
Rise and fall
JCPenney started as the Golden Rule, a dry goods store, in Kemmerer, Wyoming, in 1902.
Its founder, James Cash Penney, quickly expanded the business and by 1917, there were 175 stores, later renamed JCPenney. By 1929, on the eve of the stock market crash and Great Depression, JCPenney had 1,000 stores.
Its stores were known for their low prices. Merchandise could be bought only with cash, not on credit.
JCPenney survived the Depression and by 1950, Fortune Magazine declared the company the “King of Soft Goods.” Penney himself became known as the “Man with a Thousand Partners.”
By the time he died in 1971, JCPenney had more than 1,600 stores, many in newly-built suburban malls, and was the fifth largest US retailer.
But the company’s mid-market appeal was tested by growing competition during the 1980s and 1990s. Discount stores including Walmart and Target spread, stealing away JCPenney’s budget-conscious customers.
The company was hit hard by the Great Recession in 2008. It lost shoppers to discount stores and struggled to bring them back as the economy began to rebound.
By the end of 2010, JCPenney’s sales had fallen 10% from their 2006 high of about $20 billion, and the company attracted the scrutiny of hedge fund manager Bill Ackman. Ackman bought up a chunk of Penney and installed Ron Johnson, Apple’s former head of stores, as CEO.
Without testing shoppers’ reactions first, JCPenney under Johnson changed its advertisements, its logo and its store designs.
The chain ditched top private-label brands with loyal followings and introduced new ones that had little relevance to its middle-income customers. And it ended coupons, a move that alienated loyal shoppers.
JCPenney’s sales plunged $4.3 billion in 2012, a 25% drop from the previous year. Johnson left in 2013, 17 months into the job.
The company cycled through several CEOs and strategies in the following years and brought back appliances for the first time in decades, a move that didn’t resonate with customers. The company was unprofitable every year beginning in 2011 and its sales fell each year starting in 2015.
In May of 2020, soon after the Covid-19 pandemic began and JCPenney was forced to close stores temporarily, the company filed for bankruptcy after 118 years in business.
At the time, JCPenney had more than 800 stores and 85,000 employees.
Turning around JCPenney
JCPenney has around 670 stores today and has little debt for the first time in years.
The company is owned by mall landlords Simon Property Group and Brookfield Asset Management. The two firms rescued JCPenney out of bankruptcy for $1.75 billion in the fall of 2020. It was their interest to do so. JCPenney was a key tenant at hundreds of malls and a liquidation would have left vacancies in their shopping centers.
During the bankruptcy process, JCPenney restructured its debt and closed more than 200 stores.
Rosen said JCPenney now has the financial flexibility to invest in upgrading its technology, supply chain and revamping stores under under its new owners.
“That alignment with ownership is critical, especially as you’re going through a transformation that requires significant investment,” he said.
Instead of chasing new shoppers, as several of Rosen’s predecessors tried to do, he has built a strategy centered on convincing existing budget-focused customers to visit more frequently and buy a wider array of goods at JCPenney instead of other stores.
The company is attempting to highlight merchandise and services like hair salons and family portrait offerings that resonate with the its core working-class families. Teachers are the number one profession among its customers, so JCPenney has focused on ensuring stores have clothing they want to wear to work.
JCPenney’s 14-year partnership with Sephora ended in 2020 and it has started to replace many Sephora shops with new beauty departments. Roughly 20% of the products in new beauty areas come from a partnership with Thirteen Lune, an e-commerce company that features brands started by founders of color.
“Customers want to see brands that are brought to them by Brown and Black founders, and they want to see brands that look relevant to their skin types,” Rosen said.
Retail experts say that JCPenney is improving under Rosen and his strategy to target different customers than competitors is shrewd. Stores are better lit than they were before the bankruptcy and top vendors are selling merchandise to the company again.
“A lot of people in the industry wrote them off,” said David Katz, chief marketing officer at Randa Apparel & Accessories, which makes Levi’s, Dockers, Haggar and other brands. “Today, they are a good partner. We’re giving them a lot more financial credit than we used to. We are developing more products for them because we have confidence they’ll be able to sell it effectively.”
Still, JCPenney faces both short-term challenges and long-term questions about its survival.
Inflation is squeezing customers, particularly its middle-income shoppers. It’s not the only retailer facing that problem — Kohl’s said last week that its middle-income customers are buying fewer items when they shop and switching to private brands.
Rosen said that more JCPenney customers are buying the company’s lowest-priced products and switching to its cheaper private brands. The company plans to offer some products at 2019 prices during the holidays, including its St. John’s Bay cable sweater.
The bigger question remains whether there is a place for JCPenney in the changing era of retail and if it can draw younger customers.
Stiff competition has taken a toll on the entire department store landscape, including Kohl’s, Nordstrom and Macy’s.
JCPenney can’t solely rely on winning more business from existing shoppers with limited discretionary ability, said Schmidt from Coresight. The chain needs to attract new shoppers, too. But winning new customers has never been harder.
“They’re doing some really good things in terms of their positioning,” Schmidt said. “But the department store is a tough place to be. It will be a challenging road.”
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The post JCPenney was once a shopping giant. Can it make a comeback? appeared first on East Idaho News.
JCPenney was once a shopping giant. Can it make a comeback?
(CNN) — Marc Rosen didn’t flinch when he was offered the top job at JCPenney last year.
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