JCPenney was once a shopping giant: can it make a comeback?

JCPenney CEO Marc Rosen wants to revive the retailer.

Marc Rosen didn’t flinch when he was offered the top job at JCPenney last year.

A 20th-century retail mainstay for middle-class Americans looking for affordable clothing and home furnishings, JCPenney struggled for more than a decade and went bankrupt soon after the Covid-19 pandemic. in 2020.

But Rosen, a retail veteran who previously worked at Walmart and Levi’s, said he “had no personal hesitation” in trying to revitalize the 120-year-old brand and protect JCPenney from extinction like Barney’s, Lord & Taylor, Century 21 and other closed retailers.

“I believe in undertaking large-scale transformation,” Rosen, 54, told CNN Business in a video interview this month. “There was an opportunity to really take that brand and make it relevant again.”

Rosen is betting on his turnaround plan to attract “the diverse working families of America.”

The typical JCPenney customer has a median family income between $50,000 and $75,000. About 30% of the retailer’s customers are Black, Indigenous and of color, the company says, a larger share than many competitors

JCPenney is therefore pursuing these shoppers with a revised beauty strategy after the end of a long partnership with Sephora. He renovated stores and added new major brands and private label clothing and home furnishings brands. The company has also improved its technology and online experience to attract more online sales. Just a quarter of JCPenney’s sales are online, behind rivals.

Rosen said customers are now shopping more frequently at JCPenney, the first time this has happened for the brand in years, and it is regaining market share in key departments such as homewares. (JCPenney does not detail sales publicly.)

But there are signs of pressure: Visits to all JCPenney stores were down 29% in October compared to the same period a year ago, according to data from In October, traffic to JCPenney’s website was up just 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 to date: the holiday shopping season. And it comes at an uncertain time for the US economy and buyers.

The company said the holiday season is off to a good start. But JCPenney’s core clients are feeling strained by the highest inflation in 40 years and they have shown signs of pulling back on discretionary assets – the bulk of what JCPenney sells.

Rosen must also pull himself out of years of mismanagement and failed strategies within the company.

The company faces relentless 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 undermined the department store model by selling designer brands at bargain prices.

“The future will be tough because it’s difficult for large stores to navigate even under the best of circumstances,” said Erin Schmidt, senior analyst at Coresight Research, a retail research and consulting firm. “The competition is really fierce.”

Rise and fall

JCPenney started as 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. In 1929, on the eve of the stock market crash and the Great Depression, JCPenney had 1,000 stores.

His stores were famous for their low prices. Goods could only be purchased with cash, not on credit.

JCPenney survived the Depression and in 1950 Fortune magazine declared the company the “king of soft goods”. Penney himself became known as “the man of a thousand partners”.

At the time of his death in 1971, JCPenney had over 1,600 stores, many in newly built suburban malls, and was the fifth-largest US retailer.

But the company’s appeal in the middle market was tested by growing competition during the 1980s and 1990s. Discount stores, including Walmart and Target, spread, robbing value-conscious customers their JCPenney budget.

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 peak of around $20 billion, and the company caught the eye of hedge fund manager Bill Ackman. Ackman bought part of Penney and installed Ron Johnson, Apple’s former store manager, as CEO.

Without testing shopper feedback first, JCPenney under Johnson changed its ads, logo, and store designs.

The chain ditched the best private label brands with loyal followers and introduced new ones that had little relevance to its middle-income customers. And that ended coupons, a move that alienated loyal shoppers.

JCPenney’s sales plunged $4.3 billion in 2012, down 25% from the previous year. Johnson left in 2013, after 17 months on the job.

The company went through several CEOs and strategies over the next few years and brought back home appliances for the first time in decades, a move that didn’t resonate with customers. The company was no longer profitable every year from 2011 and its sales fell every year from 2015.

In May 2020, shortly after the onset of the Covid-19 pandemic and the requirement for JCPenney to temporarily close stores, the company filed for bankruptcy after 118 years in business.

At the time, JCPenney had over 800 stores and 85,000 employees.

Turn around JCPenney

JCPenney now has around 670 stores and is low in debt for the first time in years.

The company is owned by shopping center owners Simon Property Group and Brookfield Asset Management. The two companies rescued JCPenney from bankruptcy for $1.75 billion in the fall of 2020. It was in their best interests to do so. JCPenney was an anchor tenant in hundreds of malls and a liquidation would have left vacancies in their malls.

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 its new owners.

“That alignment with ownership is key, especially as you go through a transformation that requires significant investment,” he said.

Instead of chasing new buyers, as several of Rosen’s predecessors tried to do, he developed a strategy centered around convincing existing budget-minded customers to visit more frequently and buy a wider range of products. at JCPenney instead of other stores.

The company attempts to highlight merchandise and services such as hair salons and family portrait offerings that resonate with working-class families. Teachers are the number one profession among its customers, so JCPenney has focused on ensuring stores have clothes they want to wear to work.

JCPenney’s 14-year partnership with Sephora ended in 2020, and it began replacing many Sephora stores with new beauty departments. About 20% of the products in the new beauty spaces come from a partnership with Thirteen Lune, an e-commerce company that presents brands launched by color founders.

“Customers want to see brands brought to them by the founders of Brown and Black, and they want to see brands that feel relevant to their skin type,” Rosen said.

Retail experts say JCPenney is improving under Rosen and its strategy to target different customers than its competitors is shrewd. Stores are better lit than they were before the bankruptcy, and top salespeople are once again selling merchandise to the business.

“A lot of people in the industry have written them off,” said David Katz, director of marketing at Randa Apparel & Accessories, which makes Levi’s, Dockers, Haggar and other brands. “Today they are a good partner. We give them much more financial credit than before. We are developing more products for them because we are confident that they will be able to sell it effectively.

Still, JCPenney faces both short-term challenges and long-term questions about its survival.

Inflation squeezes customers, especially middle-income shoppers. It’s not the only retailer facing the problem – Kohl’s said last week that its middle-income customers buy fewer items when they shop and switch to private labels.

Rosen said more and more JCPenney customers are buying the company’s lower-priced products and switching to its lower-priced private labels. The company plans to offer select products at 2019 holiday prices, including its St. John’s Bay cable sweater.

The big question remains whether there is a place for JCPenney in the changing era of retail and whether it can appeal to younger customers.

The fierce competition weighed on the entire department store landscape, including Kohl’s, Nordstrom and Macy’s.

JCPenney can’t just rely on getting more business from existing buyers with limited discretionary capacity, Coresight’s Schmidt said. The chain must also attract new buyers. But winning new customers has never been so difficult.

“They’re doing some really good things positioning-wise,” Schmidt said. “But the department store is a tough place to live. It will be a difficult road.

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