plano, texas — The pleasant surprise of what's inside JCPenney—the latest theme in the retailer's advertising campaign—goes much deeper than the trendy fashions and home accessories found in its stores, catalogs and on its Web site. At a corporate level, what's going on inside JCPenney is extraordinary turnaround progress.
The same week that the company unveiled its latest image campaign building upon the "It's All Inside" slogan, JCPenney reported gains in operating profit and comparable-sales for ongoing operations excluding Eckerd, which will be sold.
A 12.9% increase in operating profit for the fiscal year ended Jan. 31, 2004 marked the third annual double-digit gain. Comps also grew for the third year, increasing 0.9% and building even stronger in recent months. For the fourth quarter, comps rose 3.2% at department stores and 8.7% in the catalog/Internet division.
"Both sales and operating profit continue to show solid improvements," said Vanessa Castagna, chairman and ceo of JCPenney stores, catalog and Internet, in a Feb. 26 conference call on quarterly results. "We are focused on the fundamentals: providing our moderate customer with fashionable, trend-right merchandise that delivers compelling value and quality while improving her shopping experience."
Divisions classified as discontinued operations—the Eckerd drugstore chain and department stores in Mexico that were sold—did impact the company's financial performance with $1.29 billion in non-cash charges taken in the fourth quarter. As a result, JCPenney as a company reported a $928 million loss for the year.
But discounting the one-time effect of these divestitures, progress in the JCPenney store division has been impressive. Castagna said the retailer is benefiting from conversion to a centralized buying organization and getting better each day at hitting the right mix and presentation of items that resonate with its shoppers.
"In every merchandising division, we emphasize dominant key items with a focus on bigger and bolder merchandise statements as we work toward making JCPenney a preferred destination for the moderate customer," Castagna said.
Castagna said JCPenney is focused on having wide, in-stock assortments in basics such as towels, jeans and underwear and on offering the latest fashion trends at a value. Expanded assortments through catalog and Internet offerings are promoted heavily along with the convenience of shopping JCPenney in its three channels.
Strong sales growth has been noted in home, jewelry, handbags, shoes, careerwear, juniors and young men's, she added. In addition, Castagna said sales of JCPenney's private brands "had strong sales, with momentum building in the back half."
In the catalog division, a repositioning of that department resulted in the first annual sales increase in several years, with revenue up 1.5%. Internet sales, meanwhile, grew 50% to $600 million.
Besides refining its mix, JCPenney has been busy remodeling stores and for the first time in years is actually in growth mode. About half of the 15 stores scheduled to open this year will follow a new freestanding prototype that debuted in October. Since that first test store in Cedar Hill, Texas, three more freestanding units have opened, in Coon Rapids and Maple Grove, Minn., and in Plainfield, Ind.
"The off-mall strategy gives us an opportunity to add stores without relying exclusively on the development of new malls and gives our moderate customer another convenient alternative for shopping at JCPenney," said Castagna, adding that results have "exceeded our expectations."
Pulling all of these strategies together is JCPenney's newest television advertising campaign, which debuted Feb. 29 during the Academy Awards. A combination of humorous and edgy fashion-focused spots, the television commercials are the latest evolution of the 3-year-old "It's All Inside" slogan that challenges shoppers to see what's inside JCPenney stores. Initial commercials will promote women's spring fashions, intimates, fine jewelry, children's clothing and the convenience of shopping for home-related items through the JCPenney Web site.
"Many, many women do not know what JCPenney has to offer," Michael Boylson, executive vp and chief marketing officer for JCPenney stores, said at a media event that launched the campaign. "We really have an issue with customer perception."
Boylson said the message is to show viewers exactly what's inside JCPenney stores that they may not be aware of, including fashionable apparel and home goods at a value, trend-right and extensive assortments and convenient methods of shopping.
"It's about bringing luxury and style to the middle American woman at a price she can afford," he said. n
