J.C. Penney (JCP) Announces Three-Year Growth Plan; Includes Focus on Omnichannel Experience

August 17, 2016 4:18 PM EDT

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At its 2016 analyst meeting in Las Colinas, Texas, J. C. Penney Company, Inc. (NYSE: JCP) today presented a three-year plan for accelerated growth and outlined its financial expectations for improved performance beyond 2017.

"Since becoming CEO a year ago, the team and I have made considerable progress balancing the art and science of retail by improving our execution in omnichannel, marketing, store operations, supply chain and merchandising," said Marvin R. Ellison, chairman and chief executive officer of JCPenney. "There is still much work to do, but I am confident that our focus on sales growth, new technology and expense management will continue to accelerate our turnaround and create shareholder value."

Building Value and Differentiation Through Private Brands, Home and Beauty
JCPenney is committed to providing customers with compelling merchandise and exclusive shopping experiences that create lasting loyalty. To deliver on its value proposition to shoppers, the Company will drive private and exclusive brand penetration up to 70 percent of total merchandise sales by 2019. This target will be achieved by eliminating labels that are no longer relevant and expanding popular existing brands to additional categories. To further differentiate JCPenney from brick-and-mortar and online competition, the Company will maximize opportunities in three specific merchandise strategies:

  • Special Sizes: Growing the special sizes offering by leveraging in-house design and trend teams to deliver quality plus size, petite and big & tall apparel that meets the lifestyle needs of various ages and diverse body types.
  • Home Refresh: Revitalizing the JCPenney Home store to entice customers seeking to update their homes, including rolling out major appliance showrooms to nearly 500 locations and jcp.com, testing Empire Today flooring in three markets and adding Signature Design by Ashley® to the furniture assortment in select stores and jcp.com.
  • Beauty Experience: Pursuing additional growth in Women's beauty by expanding the number of Sephora inside JCPenney locations, accelerating The Salon by InStyle renovations, rejuvenating center core and emphasizing fine jewelry.

Powering a Swift and Nimble Omnichannel Experience
JCPenney is advancing its omnichannel execution to connect with customers how, when and where they prefer to shop. A major component of this strategy is mobile, which is the Company's single greatest touch point with digitally-savvy shoppers. Bolstering this approach is a newly redesigned JCPenney app that enables customers to locate items, apply coupons and access their JCPenney Rewards more easily. Shoppers can also complete their jcp.com purchases with a variety of convenient shipping and pickup options, resulting in over 50 percent of online orders stemming from or leading to an in-store experience:

  • Ship to any JCPenney store: Given the Company's history of operating catalog service desks, JCPenney is one of the few retailers today to offer the option of shipping an online order to any one of its 1,000 stores nationwide;
  • Same-day pickup in stores: Over 150,000 items on jcp.com are eligible for same-day pickup at any JCPenney store within four hours of the order being placed;
  • Faster home delivery: In 2017, the Company will offer a standard delivery turnaround of two business days or less to over 95% of the U.S. population.

To efficiently fill jcp.com orders, JCPenney has made significant investments in state-of-the-art systems that support an enterprise-wide fulfillment strategy to minimize markdowns and improve customer service. In addition to a network of three direct logistic facilities, 250 stores are now capable of filling jcp.com orders with store inventory and shipping directly to customers. This added fulfillment option allows the Company to meet customer demand for a particular style, color or size, while delivering orders faster than ever.

Financial Outlook
In light of these sales and profit enhancing initiatives, the Company also provided financial performance estimates for the 2017-2019 period, as follows:

  • Compounded annual comparable sales growth anticipated to be 3.0 %;
  • Gross margin is expected to improve 75-100 basis points;
  • Additional SG&A expense leverage of 215-240 basis points;
  • Net income is expected to be between $450-500M by 2019;
  • Earnings per share of $1.40-1.55 by 2019.

Ellison added, "Although we've sharpened our priorities for the next three years, our strategic framework remains the same. The entire team - from stores to supply chain to the home office - is squarely focused on delivering an unparalleled omnichannel experience, powerful private brands and increased revenue per customer. Under this framework, we are taking market share, outpacing competitors and improving the long term profitability of our business."



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