JC Penney interim CEO sees green shoots as retailers plan change

Just months after JC Penney’s acting CEO, Stanley Shashoua said he saw signs of business growth.

“JC Penney is an excellent destination for the American family, and our strength lies in our well-known brands and the services we offer,” he said in a telephone interview. “We are seeing business improvements week after week and we are becoming more optimistic as we strive for this.”

Specifically, he cited the rise in household goods and sportswear – two categories that outperformed during the Covid pandemic as Americans sought to refresh their homes and replenish their closets with more comfortable clothing. More recently, Shashoua said, customers have come to Penney for Easter dresses and other formal attire – another sign that people are ready to get dressed again.

Shashoua, who is also the chief investment officer of the largest American mall owner – Simon Property Group – has been in charge of Penney since December 31. When former CEO Jill Soltau left abruptly, following the bankruptcy of Chapter 11 of the store chain. months earlier.

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 bankrupt assets for $ 1.75 billion in cash and debt. This included taking control of about 670 stores, compared to the more than 800 Penney had when he filed. For now, the company said, no further store closures are planned.

According to Shashoua, the search for a permanent CEO is also ongoing and the prospects are plentiful.

“We’re taking our time,” he said. “I received a lot of interest from a lot of high-quality, highly qualified people. And that is very encouraging. People come to us and tell us that they love Penney, they grew up with Penney and are emotionally invested in him and have real views on the business. “

JC Penney’s problems did not arise overnight. The business had stumbled for years due to the rise of e-commerce and what many analysts say was a failure on the part of management to invest in modernizing stores and modern marketing. A large debt load and the pandemic are ultimately what pushed it over the edge.

After working through bankruptcy proceedings, Shashoua said the Texas-based company emerged with a stronger balance sheet and better liquidity, although it did not provide figures. He said the focus was on keeping cash flow in the house. He has reduced contracts with suppliers and invested in launching more private labels in clothing and at home, he added.

“It’s a very similar approach in the initial stages that we took with all the other companies that we managed to return,” he said.

Simon has already helped bankrupt several retailers. These include Aeropostale retailers, Forever 21, Brooks Brothers and Lucky Brand. The latter went bankrupt in 2020.

Simon Simon CEO David Simon said his company had “made a lot of money” in its Aeropostale deal. He also told analysts, “We are certainly as good as private equity guys when it comes to retail investment.”

In an attempt to save Penney with Brookfield, Simon saw an opportunity in Penney’s loyal and diverse customer base. Also, at one point, it had a Penney store in about 50% of its U.S. malls, based on an analyst’s analysis, which probably spurred the owner’s interest in investing to avoid further closing stores to his own. commercial centers.

Simon Property shares have risen more than 33% this year. It has a market cap of $ 42.7 billion.

Simon’s retail transactions often involve working with clothing licensing firm Authentic Brands Group, which now also plays a role in reviving JC Penney.

Shashoua said some of ABG’s clothing brands, such as Forever 21 and Juicy Couture, will be added to the range of Penney products in stores and online. “2021 is more about rebuilding the company and I think in 2022 you will 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, goods for women in size ranges including items for children and babies, according to Shashoua. He also wants to increase online commerce, which now accounts for about 20% of Penney’s sales.

Certainly, Penney’s path to profitable growth, customer recovery and market share in key categories such as clothing and footwear will not come easily.

Consumers have moved further and further away from suburban malls, especially during the pandemic. Many have moved their online purchases to the benefit of e-commerce giants such as Amazon and Walmart. Clothing sales were also hampered during the health crisis, as Americans spent much less time getting dressed to go out.

U.S. consumer spending on clothing and footwear fell 48 percent year-over-year in April, when many retail stores selling clothing and accessories closed for the entire month, according to a study by Coresight Research. More recently, spending in this category rose again, up 0.8 percent in January, Coresight said.

Last year, along with Penney, Neiman Marcus, Stage Stores, Lord & Taylor and Century 21 went bankrupt.

Penney hopes to avoid the fate of the iconic Sears chain. Since filing for bankruptcy in 2018, Sears has slowly shrunk its store footprint to become a fraction of its former self.

“We are strengthening the fundamentals of retail, with a focus on modern, digital retail and an attractive customer experience,” said Shashoua. “Retail is evolving faster than ever … and so our goal is to execute quickly.”