JCP Gaining in Slowing Market

Plano, Texas — The economy may be tough and consumers under pressure, but JCPenney believes it is positioned to gain share throughout the downturn.

Speaking to analysts last week during the company's quarterly conference call, JCPenney execs pointed to the company's financial positioning, structural flexibility and branded merchandise initiatives to weather the storm. Consolidation across the industry as other retailers shrink their store bases — or exit the business entirely — also bodes well for Penney's strategies, they asserted.

"We're opening stores, not closing them," said Mike Ullman, chairman and ceo. "As you know, the strong will get stronger in this environment and will emerge with a bigger footprint and stronger customer loyalties."

Wall Street seemed to agree. Although JCPenney last week announced a 35.7% decline in profit for the second quarter ended Aug. 2, the performance beat analysts' estimates and Penney's stock shot up 6% in the early hours following its Aug. 15 quarterly report.

Net income was $117 million, or 52 cents per share. Sales slipped 2.5% to $4.3 billion, and comps fell 4.3%.

As is the case across retailing, home lagged both in-store and on line, according to Ken Hicks, president and chief merchandising officer. However, the July debut of the Dorm Life back-to-school collection and the Linden Street lifestyle program for young families are showing some bright spots, he said.

Early winners within Dorm Life include bedding, window and accessories. In Linden Street the lead items so far have been the slipcover, chenille bedding and bath accessories, according to Hicks.

JCP is "pleased" with the performance of American Living, which across multiple hard and soft line categories in the store, but home has been impacted there as well. Hicks noted that the inaugural buy for the spring 2008 launch of the program took place before the economy hit a wall and said the company has made changes in product and pricing to address the current economic environment for the spring 2009 flow.

"Both teams [JCP and Polo Ralph Lauren's product development group] believe in the concept," said Hicks, adding that American Living is still projected to become a $1 billion program over a period of a few years.