Penney's returning chief executive, Mike Ullman, outlined to a
generally appreciative gathering of shareholders today how he plans to get the
iconic, but ailing department store chain "back on track," but cautioned that it
won't happen overnight and asked for patience.
His words came as Wall Street sold off the stock again, following a dismal report late Thursday of a wider first-quarter loss and 16 percent decline in sales. By mid-day, Penney shares (ticker: JCP) was down more than 2 percent at $18.34.
Ullman outlined the challenge: highly disaffected customers who didn't find the merchandise they wanted, including familiar private-label brands, and a lack of promotions to lure them into stores. Moreover, Penney's e-commerce site offered goods different from what customers found in stores.
But without mentioning former CEO Ron Johnson by name, Ullman made clear that the mid-market retailer knows what went wrong and, with the help of outside consultants and returning executives, will turn Penney's around. Johnson, who came to Penney after running Apple's retail stores, cut out promotions and sales and had only begun to bring in branded in-store boutiques when he was sacked last month after 18 months on the job.
In a low-key manner, in sharp contrast to Johnson's charismatic presentations, Ullman -- who led Penney for seven years before Johnson was hired -- showed off a trifecta of TV spots aimed at wooing back once-loyal customers.
The first, called "Apology," expressed remorse for not getting things right with shoppers. "Come back to JC Penney, we heard you," it said. The second, called "Thank you," lavished gratitude on those giving the chain a second chance, saying: "We're speechless." And the third, "Mother's Day," timed with mail pieces and newspaper ads, was a return to the old Penney's with 20 percent discounts and "doorbuster" specials before the holiday.
"It did resonate with the customer," Ullman said in his very neutral tone.
He promised better results in the store's much-battered home sections, hurt by the housing industry decline. More than 500 stores will get a total makeover, inherited from the Johnson era, with new merchandise including Martha Stewart's "MarthaCelebrations" paper products and Jonathon Adler items. Penney's and Stewart remain in a legal dispute with Macy's, which sued in a New York court to keep many of her branded items exclusive. The court has allowed Penney's to use her products under a house label. The paper products are not in an exclusive category, a Penney's spokeswoman said.
Ullman said one key to the turnaround will be private-label brands like St. John's Bay and Arizona, which make up about 50 percent of store space. These allow Penney's to offer the best values in a typical mall, he said. It announced St. John's, Ambrielle, Made for Life and JCP Home -- all killed by Johnson -- would be brought back this year.
The website no longer offers different merchandise, but will have extended sizes, he said.
Unlike last year, the chain will again promote back-to-school specials, Ullman said, noting that in some categories the seasonal sales are more importrant than Christmas.
"It's very encouraging, that he's getting the chain back on track," said Sterling Carfberry, a Penney's retiree and shareholder who lives in Plano. "I am disappointed that the board didn't act any earlier in removing Johnson."
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