JCP: J.C. Penney Co. Analysis and Research Report

2018-02-13 - by Asif , Contributing Analyst - 95 views

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J. C. Penney Company, Inc. is a holding company whose principal operating subsidiary is J. C. Penney Corporation, Inc. (JCP). JCP was incorporated in Delaware in 1924, and J. C. Penney Company, Inc. was incorporated in Delaware in 2002, when the holding company structure was implemented. The holding company has no independent assets or operations and no direct subsidiaries other than JCP.

The holding company is a co-obligor (or guarantor, as appropriate) regarding the payment of principal and interest on JCP’s outstanding debt securities. The guarantee of certain of JCP’s outstanding debt securities by the holding company is full and unconditional.

Growth Initiatives

The company's growth strategy for 2017 focuses on the following five initiatives:

  • Beauty;
  • Home refresh and toys;
  • Omnichannel;
  • Pricing strategy; and
  • Women's apparel business.

First, the company continue to focus on its beauty categories of Sephora and The Salon by InStyle. J.C. Penney has completed its plan to add 70 new Sephora locations and expand 32 existing locations in 2017, bringing the total number of its Sephora locations to 642. The company launched several new brands in its Sephora shops including Fenty Beauty by Rihanna, which is exclusive to both Sephora and Sephora inside JCPenney. The company believe this new launch will continue to drive significant incremental sales and foot traffic to its Sephora inside JCPenney shops during the holiday season. J.C. Penney is rebranding its salons to The Salon by InStyle and also recently added new functionality to jcpenney.com and its mobile app, allowing customers to book salon appointments easily and more conveniently. Magnifying the importance of physical stores, the company see Sephora and Salon as differentiators to help drive traffic and increase the frequency of visits to its stores.

Second, the company plan to increase its revenue per customer with its home refresh and toys initiatives. J.C. Penney has established appliance showrooms in approximately 600 stores, including 100 new showrooms in 2017, and recently added Frigidaire to its assortment. The company expect the addition of Frigidaire gives it the ability to drive business-to-business sales with what the company believe is one of the industry's best opening price point brands. Additionally, J.C. Penney has completed its plan to expand its mattress showrooms to 500 stores and to add new toy shops to the merchandise assortment of all stores. Lastly, J.C. Penney is conducting several tests within its Home Store focusing on home installed services including an HVAC install program through its partnership with Trane®, bathroom remodeling with Re-Bath®, and quick ship and installed window blinds.

Third, the company remain committed to becoming a world-class omnichannel retailer. The company's online business remains strong, having delivered double-digit growth to date in 2017. The company plan to continue to drive increased online revenue by increasing its online SKU assortment, continuing to improve site functionality and enhancing its mobile apps. During 2017, the company also expanded its ship-from-store capabilities from approximately 250 stores to 100% of its store network.

Pricing strategy is its fourth initiative. In 2017, J.C. Penney has restructured the internal pricing process so that all of its pricing and promotional decisions will be made using a more data-driven approach. Once fully implemented, the company expect its pricing initiatives to enhance its merchandise margin performance. J.C. Penney has also recently aligned its pricing and planning and allocation teams under the oversight of the finance organization. By centralizing these functions, J.C. Penney has streamlined its pricing, promotion and markdown strategies with the goal of generating increased inventory turns and higher productivity levels.

Last, J.C. Penney is focused on improving its women's apparel merchandise assortment. J.C. Penney is enhancing its partnership with Nike® to create inspiring brand shops and offering an improved assortment of apparel, accessories and footwear across all divisions. In the women's area, the company plan to have Nike® in all stores, an increase of over 400 stores from 2016. J.C. Penney is also converting all women's shoe areas to open sale fixtures this year and are introducing new styles and comfort features to attempt to seize available market share in footwear. In addition, J.C. Penney is taking steps in women's apparel to simplify the floor, better balance its career and casual offerings and create a stronger value statement with pricing. J.C. Penney has recently announced an exclusive partnership with legendary footwear designer Libby Edelman launching a contemporary line of women's apparel, shoes and accessories. In addition, J.C. Penney has launched an exclusive limited edition capsule collection created with award-winning actress and style icon, Tracee Ellis Ross. The company also plan to expand its use of customer and trend data more effectively to ensure the company better understand the desires of the customer in advance of the season. Finally, the company see an opportunity with the plus size community that remains underserved, and with its women's plus boutique shop Boutique+™, the company see an opportunity to become the destination for providing style, value and an appealing shopping environment.

The company believe these growth initiatives not only serve the needs of its value-oriented customer but also differentiate it from its traditional competitors.

On Jan. 4, 2018 - J. C. Penney Company, Inc. announced that its comparable store sales for the combined nine-week period ending December 30, 2017 increased 3.4 % over the same period last year. The Company also reaffirmed all components of its most recent full-year financial guidance for fiscal 2017.


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