JC Penney’s interim CEO sees green shoots as retail turns around

An empty parking lot is seen outside a closed JC Penney Co. store in Mt. Juliet, Tennessee, on Thursday, April 16, 2020.

Luke Sharrett | Bloomberg | Getty images

Just a few months after serving as JC Penney’s interim CEO, Stanley Shashoua said he sees signs of growth in the company.

“JC Penney is a great American family destination, and our strength lies in our legendary brands and the services we provide,” he said in a telephone interview. “We’re seeing week-to-week improvements in the business, and we’re getting more and more optimistic as we work our way through this.”

In particular, he mentioned the growth of household goods and sportswear – two categories that have fared better during the Covid pandemic, as Americans want to refresh their homes and supplement their closets with more comfortable clothes. More recently, Shashoua said, customers came to Penney for Easter dresses and other formal attire – another sign that people are ready to get dressed again.

Shashoua, who is also Chief Investment Officer of the largest owner of U.S. shopping centers – Simon Property Group – has been at the helm of Penney since December 31. months earlier.

Simon, along with American mall owner Brookfield, came to the rescue late last year and acquired nearly all of Penney’s assets from bankruptcy for $ 1.75 billion in cash and debt. That included controlling about 670 stores, compared to the more than 800 Penney had when he filed the application. For now, the company said, no additional store closings are planned.

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

“We’re 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 they love Penney, they grew up with Penney and they are emotionally invested in it and have real points of view. about the company. “

Simon Property is hoping for another success story

JC Penney’s problems did not emerge overnight. The company had been stumbling for years due to the rise of e-commerce and what many analysts say was a failure of management to invest in upgrading stores and modern merchandising. Heavy debt and the pandemic eventually pushed it over the edge.

After going through bankruptcy proceedings, Shashoua said the Texas-based company has gained a stronger balance sheet and better liquidity, although he has not provided numbers. He said the focus has shifted to keeping money in the treasury. It has scaled back contracts with suppliers and invested in launching more private labels for clothing and home, he added.

“It’s a similar early stage approach that we’ve taken with all the other companies we’ve managed to turn around,” he said.

Simon has already helped bring several retailers out of bankruptcy. These include the Aeropostale, Forever 21, Brooks Brothers and Lucky Brand shopping centers. The last two filed for bankruptcy in 2020.

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

In his bid to co-save Penney with Brookfield, Simon saw an opportunity in Penney’s loyal and diverse customer base. At one point, it also had a Penney store in about 50% of its U.S. malls, based on an analyst analysis, which likely sparked the landlord’s interest in investing to prevent further store closings in its own malls .

Shares of Simon Property are up more than 33% this year. It has a market capitalization of $ 42.7 billion.

New brands come to stores

Simon’s retail deals often involve the apparel licensing company Authentic Brands Group, which is now also playing a role in reviving JC Penney.

Shashoua said some ABG clothing brands, such as Forever 21 and Juicy Couture, will be added to Penney’s merchandise range in stores and online. “2021 is more about rebuilding the business, and I think you’ll see good growth in 2022,” he said.

For Penney, the next few months will be focus categories for household items, menswear in large and tall sizes, women’s items in all sizes, and baby and children’s items, Shashoua said. He also wants to grow online commerce, which now represents 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 come easy.

Consumers are increasingly away from suburban shopping centers, and especially during the pandemic. Many have shifted their online purchases in favor of e-commerce giants like Amazon and Walmart. Clothing sales were also stunted during the health crisis, as Americans spend much less time getting dressed to get out.

U.S. consumer spending on apparel and footwear fell 48% last April, when many stores selling apparel and accessories were closed for the month, according to a tracking by Coresight Research. More recently, spending in the category has picked up again, growing 0.8% in January, Coresight said.

Last year, department store operators Neiman Marcus, Stage Stores, Lord & Taylor and Century 21 filed for bankruptcy along with Penney.

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

“We are strengthening the fundamentals of our retail, with a focus on modern retail, digital and an engaging customer experience,” said Shashoua. “Retail is evolving faster than ever … and that’s why our goal is to perform quickly.”