An empty parking lot is seen outside a closed JC Penney Co. store in Mt. Juliet, Tennessee, Thursday, April 16, 2020.
Luke Sharrett | Bloomberg | fake images
Just a few months after serving as acting CEO of JC Penney, Stanley Shashoua said he sees signs of growth in the business.
“JC Penney is a great American family destination, and our strength is in our historic brands and the services we provide,” he said in a telephone interview. “We are seeing week-over-week improvements in the business and we are increasingly optimistic as we go through this.”
Specifically, he cited growth in home goods and sportswear, two categories that have outperformed during the Covid pandemic as Americans look to renovate their homes and restock their wardrobes with more comfortable clothing. More recently, Shashoua said, customers have come to Penney for Easter dresses and other formal wear, another sign that people are ready to get dressed again.
Shashoua, who is also the chief investment officer for the largest U.S. mall owner, Simon Property Group, has been in charge of Penney since Dec. 31. That’s when former CEO Jill Soltau abruptly left, after the department store chain filed for Chapter 11 bankruptcy months earlier.
Simon, along with US mall owner Brookfield, came to the rescue late last year, acquiring nearly all of Penney’s assets from bankruptcy for $ 1.75 billion in cash and debt. That included taking control of roughly 670 stores, compared to more than 800 Penney had when it was introduced. For now, the company said, no additional store closures are planned.
According to Shashoua, the search for a permanent CEO is also ongoing and the prospects are abundant.
“We are taking our time,” he said. “We’ve gotten a lot of interest from a lot of very high-quality, highly-qualified people. And that’s very encouraging. People come to us and tell us that they love Penney, that they grew up with Penney and that they are emotionally engaged in him and have points of real view on the business. “
Simon Property looks forward to another success story
JC Penney’s problems did not arise overnight. Business had been stumbling for years due to the e-commerce boom and what many analysts say was a failure of the administration to invest in modern merchandising and store upgrades. A heavy debt load and the pandemic are ultimately what pushed him over the edge.
After working through bankruptcy proceedings, Shashoua said the Texas-based company has emerged with a stronger balance sheet and better liquidity, although he did not provide figures. He said the focus has shifted to keeping cash flow in the coffers. It has reduced contracts with suppliers and invested in the launch of more private labels in clothing and home, he added.
“It’s a very similar approach in the early stages that we have taken with all the other companies that we have managed to change,” he said.
Simon has already helped bring several retailers out of bankruptcy. These include the mall-based retailers Aeropostale, Forever 21, Brooks Brothers and Lucky Brand. The latter two filed for bankruptcy in 2020.
Simon CEO David Simon has said his company “made a lot of money” from its deal with Aeropostale. He also told analysts: “We are certainly as good as private equity when it comes to retail investment.”
In his attempt to save Penney with Brookfield, Simon saw an opportunity in Penney’s loyal and diverse customer base. It also at one point had a Penney store in about 50% of its U.S. malls, according to an analyst’s analysis, which likely also spurred the owner’s interest in investing to avoid more store closings on their own. malls.
Simon Property shares are up more than 33% this year. It has a market capitalization of $ 42.7 billion.
New brands hitting stores
Simon’s retail deals often involve collaboration with apparel licensing firm Authentic Brands Group, which is now also playing a role in the revival of JC Penney.
Shashoua said that some of ABG’s clothing brands, such as Forever 21 and Juicy Couture, will be added to Penney’s product assortment in stores and online. “2021 is more about rebuilding the company, and I think 2022 will have good growth,” he said.
For Penney, the focus categories in the coming months include household items, men’s products in large and tall sizes, women’s products in inclusive size ranges, and baby and children’s items, according to Shashoua. He also wants to grow online commerce, which now accounts for about 20% of Penney’s sales.
Certainly, Penney’s path to profitable growth, regaining customers and gaining market share in key categories such as apparel and footwear will not be easy.
Consumers have increasingly stayed away from suburban shopping malls, and especially during the pandemic. Many have switched their online purchases to the benefit of e-commerce giants like Amazon and Walmart. Clothing sales have also been hampered during the health crisis, as Americans have spent much less time dressing to go out.
US consumer spending on clothing and footwear fell 48% year-on-year last April, as many retail stores selling clothing and accessories closed for the entire month, according to a Coresight Research tracking. More recently, spending in the category has risen again, growing 0.8% in January, Coresight said.
Last year, along with Penney, department store operators Neiman Marcus, Stage Stores, Lord & Taylor and Century 21 filed for bankruptcy.
Penney hopes to avoid the fate of the iconic Sears department store chain. Since filing for bankruptcy in 2018, Sears has been slowly reducing its in-store presence to become a fraction of what it was before.
“We are strengthening our retail fundamentals, with a focus on modern, digital retail and an engaging customer experience,” said Shashoua. “Retail is evolving faster than ever … and that’s why our goal is to execute quickly.”