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JC Penney Sees Adding More Stores in Metro Areas

06/05/2012 | 04:11pm US/Eastern
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--J.C. Penney sees itself eventually opening more stores in large areas

--Company will return to using the word 'sale'

--Martha Stewart has created 3,000 items for Penney to sell, Penney CEO says

(Adds additional commentary by Penney chief executive from presentation he gave investors Tuesday)

 
   By Karen Talley 
 

J.C. Penney Co. (>> J.C. Penney Company, Inc.) sees itself ultimately adding more stores in bigger metropolitan areas to become more competitive with rivals Macy's Inc. (>> Macy's, Inc.) and Kohl's Corp. (KSS), which already are well-stored in these parts of the U.S.

Penney would like to "add more stores in big" areas, Chief Executive Ron Johnson said at an industry conference. "When we get content correct, we think we can become a growth vehicle."

Mr. Johnson sees more sophisticated merchandise serving these regions and said the company, because its is largely no longer promotions oriented, can attract key merchandise.

Mr. Johnson acknowledged Penney still has a long way to go to get existing operations humming.

"We like where we are headed," he said. But "we haven't communicated the pricing change in a way customers understand yet."

To that end, Penney is going from using the phrasing month-long "values," which confused customers, to month-long "sales," Johnson said.

"What we intend to do is a sale; we run 12 a year," Johnson said. "That's a messaging change within our vision for how we want to compete."

Johnson also said that Martha Stewart Living Omnimedia Inc. (MSO) has already created 3,000 items for the retailer to sell in one of its planned stores within a store. The arrangement with Penney is somewhat controversial: Macy's claims to have exclusive selling rights to this type of Martha Stewart product, but Penney struck a deal that is set to begin in Febuary. Macy's has taken Martha Stewart Living to court over the arrangement.

J.C. Penney has gone from being extremely promotional under its former executives to a three-pronged approach under Mr. Johnson, the former retail chief at Apple Inc. (AAPL) who joined Penney in November.

The three-level plan does away with scores of sales events in favor of more-stable pricing. The approach involves everyday prices, sales that last a month, and certain merchandise marked for clearance the first and third Friday of each month and kept at promotional levels until sold.

But in the first quarter that Mr. Johnson's strategy was in place, Penney generated a huge loss, raising questions about whether the transformation will work. For the quarter ended April 28, Penney reported a loss of $163 million, or 75 cents a share, compared with a year-earlier profit of $64 million, or 28 cents a share. Total sales declined 20% to $3.15 billion.

J.C Penney was recently down 3.6% at $24.35.

Write to Karen Talley at karen.talley@dowjones.com

Stocks mentioned in the article : J.C. Penney Company, Inc., Macy's, Inc.
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