J.C. Penney announces major initiatives; sees half a billion in profit by 2017

J.C. Penney keeps getting more bullish.



The retailer on Thursday outlined an array of new initiatives as part of a three-year plan to drive profit and accelerate growth. The company also detailed financial goals, and said it expects to reach nearly half a billion dollars in profit by 2019.



In a presentation at its 2016 analyst meeting, Penney said it will focus on beauty, special-size clothing and home goods, expanding its previously announced appliance showroom concept to 500 stores. It also plans to expand the number of Sephora stores inside Penney stores.



Penney is also seeking to boost its e-commerce and omnichannel experience, starting with a newly redesigned app that enables customers to locate items, apply coupons and access their JCPenney Rewards more easily. To efficiently fill online orders, Penney said it has made significant investments in state-of-the-art systems that support an enterprise-wide fulfillment strategy to minimize markdowns and improve customer service. It now has 250 stores capable of filling jcp.com orders with store inventory and shipping directly to customers.



“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 CEO of J.C. Penney. "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."



Here are more details about Penney’s initiatives:



• In 2017, the company will offer a standard home delivery turnaround of two business days or less to over 95% of the U.S. population.



• An increase in private and exclusive brand penetration up to 70% of total merchandise sales by 2019. Penney plans to achieve this target by getting rid of labels that are “no longer relevant” and expanding popular existing brands to additional categories.



• Increase its special sizes offering by leveraging in-house design and trend teams to deliver plus size, petite and big & tall apparel for various ages and diverse body types.



• Pursue additional growth in beauty by expanding the number of in-store Sephora shops, accelerate the remodel of its salon concept, The Salon by InStyle.



• Rejuvenate its center core and emphasize fine jewelry.



• Emphasize home by 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 furniture assortment in select stores and jcp.com.



On the financial side, Penney outlined the following targets for the 2017-2019 period:



• 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 and $500 million by 2019; and



• Earnings per share of $1.40-$1.55 by 2019.



“Although we've sharpened our priorities for the next three years, our strategic framework remains the same,” said Ellison. “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."