Mike Ullman, the present Chief Executive Officer will relinquish that post at the end of July 2015. He will stay on as Non-Executive Chairman for a year. Marvin Ellison, President and Chief Executive-in waiting, will succeed Mr. Ullman in that position. While I have not yet met with Ullman’s successor, I have heard and read good things about him and sense that he motivates associates to do their best. He will certainly need that leadership skill.
Ellison will have his hands full.
Recently the distinguished college professor, Jeremy Rosenau, professor emeritus and program director of Fashion Apparel Studies at Philadelphia University, visited the J.C.Penney store in the Willow Grove Mall at Willow Grove, PA. According to his report, he saw many tables with unfolded merchandise. However, he saw only one associate trying to put merchandise back into stock from rolling carts filled with a variety of garments. Strikingly, she did not pick up any of the merchandise that was on the floor.
The professor also shared that there was a great deal of space between tables, confirming a low level of inventory. Traffic was light, however, there were some customers shopping in the store; but there were very few carrying JCP shopping bags. He contrasted the J.C.Penney store with its next door neighbor, H&M. This store was busy. He described H&M as having lots of merchandise and great housekeeping. Another competitor, Forever 21, just opposite the J.C.Penney store, also had ample amounts of inventory. Professor Rosenau concludes that J.C.Penney has two successful neighbors in that center, and that J.C.Penney is not in the same league as its competitors.
The report is worrisome since the company is fighting to regain share of market. For the first quarter J.C.Penney will report something between a 3½% and 4½ % increase in sales. That is in the ball park of what many major retailers will likely report for the first quarter, keeping in mind that weather was severe in many parts of the country and Easter was very early.
Sales have rebounded in the home area, which had been about 24% of total sales in the pre-Ron Johnson era and dropped to about 8% during the destructive 17 months that Mr. Johnson was CEO of the company. Increasingly, J.C.Penney is enjoying stronger customer acceptance of its Home Store once again. I believe that sales are probably up in the mid-teen range. Releasing a Home Collection catalogue in March 2015 has strengthened the operation. It gives credence to the company’s competence in this important category.
The company has also embraced the omnichannel merchandising philosophy giving customers a seamless shopping experience in stores and on line. This approach is likely to increase the frequency that customers shop at J.C.Penney, and it will surely increase the size of the sales check. The company has also embarked on strengthening its accessory, handbags, intimate apparel, and shoe departments which are very important core categories that drive consumer traffic. Of course Sephora, now in nearly 500 stores, is an important asset that generates traffic. And fine jewelry, a long standing business for J.C.Penney, remains important showcasing outstanding values that consumers like.
Marvin Ellison will call his store managers “General Managers.” Many have a “warrior” spirit, just like him. The manager at the Willow Grove store has let Mr. Ullman down but hopefully that will change under Mr. Ellison. I am sure there are other stores in the chain of 1060 stores that are in equally sad shape today. I am not looking for excuses as to why Mr. Ellison will have a tough go, but I do believe that unless the company pulls together as one team, it will not recover the four billion dollars of sales volume lost under Mr. Johnson.
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