By Anna Rose Welch, Director, Cell & Gene Collaborative
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Company’s decision to revive discounts encourages sales, but analysts remain skeptical
Analysts remain uncertain about whether or not JC Penney’s (JCP) turnaround will be a success in the long run. Still, the retailer announced that November’s comparable sales —including e-commerce and brick and mortar stores — rose by more than 10 percent. This is the second straight month the company has seen increases, suggesting that CEO Mike Ullman’s recent strategies to revive the company are beginning to have a positive effect on sales.
Until October, when JC Penney reported a 0.9 percent increase in comps, the retailer had not seen sales growth for almost two years. Former CEO Ron Johnson’s plans to instate everyday low prices, cut sales promotions, and alter merchandise offerings led to huge sales losses for the company. Once Ullman was reinstated as CEO, he brought back sales promotions and the popular private-label clothing brands like St. John’s Bay and a.n.a. He has also focused on opening more Sephora stores inside JCP and introduced Disney Consumer Products designed for and sold exclusively at JCP. The company has also been working to enhance its online presence, and rather successfully, considering third quarter results showed a 24.5 percent year-over-year increase. Online sales for the retailer accounted for $266 million in the third quarter.
While the company is optimistic about its turnaround strategy, analysts are still expressing concerns that some of JCP’s latest strategies might hurt profit margins. For one, in order to clear the racks of older, more unpopular merchandise, the store instituted some impressively low prices. Some reports say items are leaving the shelves for prices as low as $1.97. Rick Snyder, an analyst at Maxim Group LLC, is not quite convinced by November’s increasing comps. He says, “I was expecting double digits, and that’s as low in double digits as you can get.” He says “the big unknown” is how much the company’s recent heavy discounts will harm profit margins. However, Brian Nagel for Oppenheimer & Co. says these discounts are an important part of the retailer’s strategy to regain customers that were lost during Johnson’s tenure. Nagel says, “The strategy of reconnecting with the core consumer is showing sales growth. Their consumer wants the discounts, and that’s what we’re seeing return.”
Retailers are evolving to consumer-centricity
CEO Ullman says of the success in November, “The traffic and conversion we saw both in stores and online this weekend was exciting for everyone across our organization. We know the environment will remain as competitive as ever, as we are all working to maintain our momentum through the holiday season.” One way JCP hopes to keep momentum during the rest of the holiday shopping season is through a new advertising campaign called “Jingle More Bells.” The campaign features a choir singing renditions of classic Christmas carols in an effort to reflect the joy of shopping and finding the perfect gift. With each ad, the company hopes to show customers they will find gifts and brands for every style and budget at JCP this holiday season.
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