The case for reinvention aka. What the hell J.C Penney!

The case for reinvention aka. What the hell J.C Penney!

Over the past week it’s like the world (or US retail market more specifically) has flipped on it’s head. Macy’s is announced disappointing results, and J.C Penney was labelled the fastest growing department store ‘in the land’.
So what exactly is going on?
Last Friday, J.C Penney announced to the market that it’s comp sales rose 6.4% – Wall Street was betting on 5.6%. Where it get’s a little strange is that Penney absolutely smashed Macy’s, who after a stunning turn around (often used by as best in class adoption technology) hit ‘it’s roughest patch since the great depression’.
Last Wednesday Macy’s announced it’s 3rd quarter of declining comp sales, reporting a -3.9% comp figure for the three months ending 31st October.
Macy-same-store-sales
Here’s the thing, Macy’s don’t see any end in sight to these declines – they’re forecasting a really tough Christmas of around -2 to -3% comps. This lack of growth has put cost pressures on the business, who was already planning on shutting 35-40 stores but as of their announcement last week will shut even more. Speculations are rife that their fleet will move from 800 to 700 stores. The brand has moved swiftly moved from a phase of digital reinvigoration to one of consolidation.
JC Penney’s also beat Nordstrom’s comps – which like Macy’s fell below expectations. It wasn’t just Nordstrom full line stores but also their cheaper Racked stores that both bore the brunt – reporting  comps of -2.2% this was evened out a little with their omnichannel/online store which was +11%…leaving Nordstrom’s comp sales at 0.9% (analysts were looking for 3.6%).
JWN-Same-store-sales
The biggest surprise with Nordstrom was their drop in gross margin (to 35.6%) – due to higher than expected markdowns and the increasing influence of their Racked (discount) stores.
JWN-Margins
While Macy’s blamed the weather (which few people bought) and a slow down in tourism (which a lot of retailers are talking about – particularly in the slowdown of the US luxury sector), Jamie Nordstrom said it straight ‘It’s just a traffic thing, we’ve got less people buying clothes this quarter than we expected and there’s really nothing else to point to’.
So why is JC doing well?
It might be as simple as it’s starting off a low base, and unlike Nordstrom and Macy’s it’s in it’s re-invention phase.
During Ron Johnson’s ambitious but misguided reign over the retailer he took 30% off the store’s revenues over a 2 year period. It’s currently in a period of securing new brands (including roll-out of Sephora concessions in the stores – which is seen as a big contributor to these positive numbers), and investing heavily in e-commerce/digital integration (not in off-price spin-off concepts like Macy’s).
That said, for all of it’s great comp sales, the retailer is still US $4billion off being where it was before Johnson took control.
jcpenney_sephora_store_in_store
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