An empty parking lot is seen outside a closed JC Penney Co. store in Monte. Juliet, Tennessee, on Thursday, April 16, 2020.
Luke Sharrett | Bloomberg | Getty Images
Just a few months after serving as interim CEO for JC Penney, Stanley Shashoua said he sees signs of growth in the business.
“JC Penney is a great destination for American families and our strength is in our historic brands and the services we offer,” he said in a telephone interview. “We are seeing improvements week after week in the business and we are increasingly optimistic as we resolve this.”
Specifically, he cited growth in household products and sportswear – two categories that outperformed during the Covid pandemic, when Americans sought to renovate their homes and replenish their wardrobes with more comfortable clothing. More recently, Shashoua said, customers have been coming to Penney to buy Easter dresses and other formal wear – another sign that people are ready to dress again.
Shashoua, who is also chief investment officer for the largest shopping center owner in the United States – Simon Property Group – has been in charge of Penney since December 31. That was when former CEO Jill Soltau abruptly left, following the Chapter 11 bankruptcy filing for Chapter 11, months before.
Simon, along with the owner of the American mall Brookfield, came to the rescue at the end of last year, acquiring almost all of Penney’s assets after the bankruptcy for $ 1.75 billion in cash and debt. This included taking control of about 670 stores, compared to the more than 800 that Penney had when it placed the order. For now, the company said, no additional store closings are being planned.
According to Shashoua, the search for a permanent CEO is also underway and the prospects are abundant.
“We are taking too long,” he said. “We got a lot of interest from a lot of 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 are emotionally committed to him and have real views on the business. . “
Simon Property waits for another success story
JC Penney’s problems did not arise overnight. The business had been stumbling for years due to the rise of e-commerce and what many analysts say was a failure by management to invest in updating stores and modern merchandising. The heavy indebtedness and the pandemic were ultimately what pushed him to the limit.
After working on the bankruptcy process, Shashoua said the Texas-based company emerged with a stronger balance sheet and better liquidity, although he did not provide figures. He said the focus had shifted to keeping the money flowing in the coffers. It reduced contracts with suppliers and invested in launching more private labels in clothing and at home, he added.
“It is a very similar approach in the early stages that we have taken with all the other companies that we have been able to reverse,” he said.
Simon has already helped to get several retailers out of bankruptcy. These include retailers based in shopping centers Aeropostale, Forever 21, Brooks Brothers and Lucky Brand. The last two filed for bankruptcy in 2020.
Simon’s CEO David Simon said his company “made a lot of money” from the deal with Aeropostale. He also told analysts, “We are certainly as good as the private equity guys when it comes to retail investments.”
In his attempt to save Penney with Brookfield, Simon saw an opportunity in Penney’s diverse and loyal customer base. At one point, she also had a Penney store in about 50% of her malls in the United States, based on an analyst’s analysis, which probably spurred the owner’s interest in investing to avoid further store closings in her own malls. .
Simon Property’s shares have risen more than 33% this year. It has a market capitalization of $ 42.7 billion.
New brands hitting stores
Simon’s retail business often involves collaborating with clothing licensing firm Authentic Brands Group, which is now also playing a role in the revival of JC Penney.
Shashoua said some of ABG’s clothing brands, like Forever 21 and Juicy Couture, will be added to Penney’s range of merchandise in stores and online. “2021 is more about rebuilding the company, and I think 2022 is going to see good growth,” he said.
For Penney, the focus categories in the coming months include household items, men’s goods in large and tall sizes, women’s goods in inclusive sizes and clothing for babies and children, according to Shashoua. He also wants to increase online commerce, which now represents about 20% of Penney’s sales.
Certainly, Penney’s path to profitable growth, winning back customers and gaining market share in key categories such as clothing and footwear will not be easy.
Consumers have increasingly avoided suburban shopping malls, especially during the pandemic. Many have shifted their online shopping to the benefit of e-commerce giants like Amazon and Walmart. Clothing sales were also hampered during the health crisis, as Americans are spending far less time getting ready to go out.
US consumer spending on clothing and footwear fell 48% year-over-year last April, when many retail stores selling clothing and accessories were closed throughout the month, according to a tracking by Coresight Research. More recently, spending in the category rose 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 store footprint 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 is why our goal is to execute quickly.”