FINANCE

Day two of J.C. Penney event details financial outlook

BY Katherine Boccaccio

New York City — The second day of J.C. Penney Co.’s launch event in New York City revealed the retailer’s long-term financial plans to generate profit and shareholder value while reinventing itself.

COO Mike Kramer outlined the company’s financial outlook, including an enhanced profit formula derived from the simplified business model unveiled the day before, based on a new three-tier pricing strategy, newly organized promotions and an overhaul of the merchandise assortment.

"The blueprint Ron (Johnson) and Michael (Francis) outlined yesterday dramatically simplifies our operations and significantly improves the company’s ability to flow margins through to the bottom line,” said Kramer. “As we transform the business model, our teams are committed to improving sales productivity in our stores, generating 40% or better gross margins, while lowering expenses to industry-leading levels.”

Kramer said the company is targeting $900 million in expense cuts to be completed over the first two years of its transformation, ultimately lowering expenses below 30% of sales in two years. Kramer said he expects to achieve an expense run rate of 27% by the end of the transformation in 2015. The savings will come primarily from stores, advertising and the operations in the company’s home office.

During his presentation, Kramer revealed plans to fund the transformation of J.C. Penney’s stores through cash from operations, beginning with $800 million in capital expenditures in fiscal year 2012.

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OPERATIONS

Report: Carrefour in talks to replace CEO

BY Katherine Boccaccio

Paris — A Thursday report by the Wall Street Journal said that French retailer Carrefour SA may hire French apparel group chief Georges Plassat to replace current CEO Lars Olofsson. WSJ cited unnamed sources close to the situation.

According to the report, Plassat could replace Olofsson as early as next week.

Plassat is head of Vivarte SA, in which he is also a shareholder.

Carrefour and Vivarte have not commented on the matter.

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STORE SPACES

RILA report highlights retail sustainability leadership and innovation

BY Marianne Wilson

Washington, D.C. — The Retail Industry Leaders Association has released its first report on sustainability practices among some of its retail members. The 2012 Retail Sustainability Report highlights sustainability leadership in the retail industry and highlights company examples to highlight the innovative work of the industry and illustrate what it can anticipate over the coming years.

The report also emphasizes the important role of other stakeholders – be it landlords, municipalities, product manufacturers, transportation providers, or customers – in the sustainability journey and how various groups can work together to achieve common goals.

Key retail sustainability trends identified in the report include: working across sectors to achieve sustainability goals, turning from sustainability as a cost and risk reduction measure to an opportunity for business growth, developing systems for continuous improvement, and fostering transparency in operations and in the supply chain.

“I think one of the biggest takeaways from the report is that creating lasting change in retail sustainability is not something the industry can do alone,” said Adam Siegel, RILA VP sustainability and retail operations, continued Siegel. “Retailers are reaching out to nonprofits, academics, and governments as well as to their suppliers, consumers, investors, and communities to provide their diverse perspectives and partnerships and help accelerate sustainable innovation for all.”

The report offered four predictions on the growth of sustainability within the industry and said that in five to 10 years:

  • Sustainability will become integrated into the business;
  • The drive to manage supply chain impacts will transform retailer-supplier relationships;
  • Industry collaboration will become the standard;
  • Business models will evolve as consumption habits change;
  • The report identified four key trends and found that leading retailers are;
  • Working with stakeholders across sectors to achieve sustainability goals;
  • Turning from sustainability as a cost and risk reduction measure to an opportunity for business growth;
  • Developing systems for continuous improvement by pulling together controls, measurement and management tools and IT systems;
  • Fostering transparency in operations and in the supply chain.

The report is available at rila.org.

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