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A ‘Penney’ for your thoughts…

BY Jeff Green

There has been a lot of chatter in our industry circles — really, everywhere — about the recent big announcement from J.C. Penney CEO Ron Johnson regarding the iconic brand’s plans for the future. Anyone who’s visited a J.C. Penney lately — present company included — can see the brand needs to make some changes. They’ve been losing traction to competitors like Target and Kohl’s in recent years, and, in my opinion, have had some trouble defining themselves in a fairly crowded and competitive segment. Similar to the issues facing Sears, J.C. Penney seems to be suffering from an identity crisis.

I see this new strategy as less of a rebranding and more of a “reinvention.” It’s certainly about more than just changing the logo — although that’s happening also — to a newly stylized JCP (though simple is always better, I’m not 100% sure I like it). This plan has been characterized by some as an attempt to “rewrite the retail rulebook,” and, while I think that’s clearly a bit of an exaggeration, this is an ambitious step for a company that has traditionally been more, well … traditional. It might literally and figuratively pay off for them, but the brand is headed into uncharted territory here, and I have some questions and concerns about some aspects of the strategy.

Some of the highlights of the new plan include a smaller new store prototype; a leaner, dramatically lower and more intuitive pricing structure that will be as much as 40% lower than the current figures; a redesign of store layouts to feature a number of compartmentalized “shop-in-shops” for a smaller, but much more diverse list of global brands; monthly merchandising and marketing resets; and significant pared down staffing and infrastructure aimed at making the retailer leaner and more efficient. This is clearly a serious attempt to redefine who they are, and I can’t help wondering if they missed out on an opportunity to go “all in” and change their name. Even a sagging retailer like J.C. Penney has some strong brand equity associated with that familiar name, but I wonder if that is a good thing or a bad thing? I also worry about the lengthy timeline. The new store prototype won’t be rolled out until 2015, and many of these changes will be introduced gradually over the next 3+ years. I wonder if that might be a case of too much too late; big changes not happening quickly enough.

Overall I think the plan moves J.C. Penney in the right direction. If they can pull it off, there is a huge upside: developing their own niche and bringing in a younger customer base. I’m most optimistic about some of the structural and organizational changes. It’s a big and important step to trim thousands of redundant employees and essentially flatten the org chart. I’m also very excited about the plan to introduce more international brands. Given J.C. Penney’s current reach, that will mean greater consumer accessibility to a number of new brands in new markets. One of the challenges that I think the new JCP might have is successfully striking a brand balance and establishing a logical brand blend. Does Martha Stewart really go with Mango and Sephora?

So can Johnson work the same magic that he helped bring about at Target and Apple over the last two and a half decades? So far the reception in the world of retail and in the financial markets has been quite positive — J.C. Penney shares were up nearly 19% immediately following the announcement — but I’m a little reluctant to spike the football before we’ve crossed the goal line. I know one thing: it’s going to be fascinating to watch it all play out.

What do you think? Is this strategy going to be a game-changer for JCP? Will other retailers follow suit if JCP has success? What other retailers need to make big changes to improve their brand status?

Please make a public comment below or feel free to e-mail me privately at [email protected].

Jeff Green is president and CEO of Phoenix-based Jeff Green Partners (jeffgreenpartners.com), a leading consulting firm specializing in retail real estate feasibility, retail expansion planning, medical retail planning, location analysis and commercial land use.


Click here for past columns by Jeff Green.

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Target had to know this was coming

BY CSA STAFF

Entry into Canada promises to be an uphill battle for Target as an announcement by Walmart Tuesday morning reaffirmed.

Walmart said 2012 would be a record year of expansion for it in Canada with the addition of 73 projects that will add 4.6 million sq. ft. of space at a cost of roughly $750 million. About half of those stores, 39 to be exact, are former Zeller’s locations acquired by Target and then resold to Walmart. All 73 stores are scheduled to open in 2012 and will bring Walmart’s presence in Canada up to 375 units by year end before Target opens its first stores in 2013.

Target is apparently taking a more measured approach with its store renovations and market entry strategy with the acquired Zellers locations than Walmart. Walmart purchased the leases from Target in June 2011 and will have all stores open by the end of the year and Target originally bought the leases before Walmart but won’t open its stores until after Walmart.

“This is an exciting year for Walmart Canada,” said Wamart Canada president and CEO Shelley Broader. “We are proud of our 18-year record of growth, and of the investment we make in the Canadian economy. As the country’s fastest growing retailer, every year we create thousands of new jobs, spend billions of dollars with Canadian suppliers, and invest millions in Canadian communities.”

Walmart Canada ended the fiscal year with 333 stores, including 164 supercenters.

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Target saves Q4 with January comps increase

BY CSA STAFF

Target appears to have salvaged its fourth-quarter sales results with a 4.3% same-store sales increase in January to offset a disappointing 1.6% increase in December and a 1.8% increase in November.

January sales increased 5.1% to $4.6 billion during the four weeks ended Jan. 28 compared with the same period the prior year, while comparable-store sales advance 4.3% on top of a prior year increase of 1.7%. The gain was driven equally by an increase in average transaction size and customer traffic. The gain fell squarely within the company’s guidance range, which called for a low-to-mid, single-digit increase and was sharply higher than the disappointing monthly results the company reported for the first two months of the fourth quarter.

“January sales were near the high end of our expected low-to-mid, single-digit range, reflecting strong performance in both discretionary and non-discretionary categories,” said Gregg Steinhafel, Target chairman, president and CEO. “Sales trends were healthy throughout the month and across the country. These results reflect our commitment to delivering a superior experience and providing compelling everyday value on a unique assortment designed to satisfy our guests’ wants and needs.”

The 4.3% increase in January when blended with November and December results puts Target’s fourth quarter same-store sales increase at 2.2%, toward the low end of its guidance range and below the 2.4% increase reported the prior year.

As in prior months, the strongest performance came in the areas of food and household essentials, which are benefitting from expansion under the PFresh store remodeling program now in about two thirds of the company’s discount stores. Same-store sales in food increased in the low teens and household essentials increased in the mid-single digits with the strongest gain coming in health care. The home category also increased in the mid single digits as did apparel, although Target noted the weakest segment of the category was women’s apparel. The only category that declined was hardlines, which fell by a mid single digit percentage.

Target is expecting February same-store sales to increase in the low-to-mid single digits.

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