J.C. Penney Transformation: Two Months In
J.C. Penney is in the very beginning of its transformation. But the first component of the strategy — a new pricing model that jettisoned hundreds of promotions in favor a three-tier model — in already in place. And not surprisingly, experts are weighing in.
Citi retail analyst Deborah Weinswig predicted in a recent note that Penney's revenue will decrease 7% this fiscal year as shoppers long used to seeing big discounts and promotions seek out such rival retailers as Macy's. She expects same-store sales to fall 9%, more than she originally anticipated. For the full fiscal year, Weinswig expects total sales to decline to $16.06 billion, down from $17.26 billion the year before.
J.C. Penney shoppers interviewed by Citi liked the new pricing, but two-thirds weren't aware of it. Once they were informed about the strategy, 26% said they would shop Penney's more often, and 8% said they planned to shop there less.
Despite her less-than-stellar outlook for this year, Weinswig believes the chain’s new strategy is likely to catch on with consumers with time. Her advice: stay the course.
"We believe our findings demonstrate that the strategies announced to transform (Penney's) business are the right actions to take and will resonate well with consumers over time," she wrote.
A similar point of view was offered by JP Morgan. After visiting stores in four regions, JP Morgan said it believes J.C. Penney's store experience is greatly improved, but that near-term sales trends since the pricing change (which went into effect on Feb. 1) look softer than initially expected. However, the firm said patience is required for the company's turnaround.
J.C. Penney hasn’t said all that much about how the pricing changes have impacted its business to date. The chain will report its quarterly earnings in May.
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