JC Penney’s interim CEO sees green shoots as retailers plot a change

A few months after being interim 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 well-known brands and the services we offer,” he said in a telephone interview. “We see improvements week by week in the business and we are increasingly optimistic as we work to achieve that.”

Specifically, he cited the growth of household items and sportswear, two categories that have performed better than the Covid pandemic, as Americans seek to cool their homes and replenish their closets with clothing. more comfortable. More recently, Shashoua said, customers have come to Penney to look for Easter dresses and other formal costumes, another sign that people are willing to dress up again.

Shashoua, who is also the chief investment officer of U.S. mall owner Simon Property Group, has been at the helm of Penney since Dec. 31. That’s when former CEO Jill Soltau left abruptly, following the bankruptcy of Chapter 11 of the department store chain. months before.

Simon, along with the owner of the American mall Brookfield, rescued him late last year, acquiring almost all of Penney’s assets in bankruptcy for $ 1.75 million in cash and debt. This included controlling approximately 670 stores, compared to the more than 800 Penney had when he filed. For now, the company said, no more stores are expected to close.

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

“We’re taking our time,” he said. “We’ve received a lot of interest from a lot of highly skilled and very high quality 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 invested. And they have points of real view of the business “.

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 the management was unable to invest in improving stores and modern merchandising. A heavy debt burden and the pandemic are ultimately what pushed her further.

After working on bankruptcy proceedings, Shashoua said the Texas-based company has emerged with a stronger balance sheet and better liquidity, though he did not provide figures. He said the focus has been on keeping cash flow in the coffers. It has reduced contracts with sellers and invested in launching more private labels on clothing and the home, he added.

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

Simon has already helped bring several fallers out of bankruptcy. These include retailers based in Aeropostale, Forever 21, Brooks Brothers and Lucky Brand malls. The latter two filed for bankruptcy in 2020.

Simon CEO David Simon has said his company “made a lot of money” in its deal with Aeropostale. He also told analysts, “Without a doubt, we are as good as private equity men when it comes to retail investment.”

In his bid to save Penney with Brookfield, Simon saw an opportunity in Penney’s loyal and diverse customer base. At one point, it had a Penney store in about 50 percent of its U.S. malls, according to an analyst’s analysis, which probably also spurred the owner’s interest in investing to prevent new store closures in the U.S. their own shopping malls.

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

Simon’s retail offerings often involve collaborating with clothing licensing firm Authentic Brands Group, which is now also playing a role in reactivating JC Penney.

Shashoua said some of ABG’s clothing brands, such as Forever 21 and Juicy Couture, will be added to Penney’s assortment of merchandise in stores and online. “2021 has more to do with 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, merchandise for men in large and tall sizes, merchandise for women in included size ranges, and items for babies and children, according to Shashoua. It also wants to grow online commerce, which now accounts for about 20% of Penney’s sales.

Of course, Penney’s path to profitable growth, attracting customers and gaining market share in key categories such as clothing and footwear will not come easily.

Consumers have moved further and further away from suburban malls and especially during the pandemic. Many have shifted 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 far less time getting dressed to go out.

U.S. consumer spending on clothing and footwear fell 48% year-over-year last April, when many retail stores selling clothing and accessories were closed for the entire month, according to a follow-up to Coresight Research. 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 shrinking its store footprint to become a fraction of its former state.

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