JCP Raises The Turnaround Question

You could ask a dozen people and get a dozen answers as to when a business turnaround actually becomes a turnaround. 

It is a question many are asking about J.C. Penney these days.

Some contend a Penney’s turnaround already has begun, citing as chief indicators a year’s worth of comparable-store gains of around 4% and a move to operating profit (Penney maintains comp guidance of 3%-4% despite a Q1 setback). Others note the deep revenue hole from which those sales gains started and the theory that a turnaround can only be validated when profitable growth is sustained.

About-Face

But first things first, and CEO Marvin Ellison’s first order of business has been getting people back in stores, online and through checkout at increasing numbers. The increasing sales, at the very least, confirm something has been working at Penney since Ellison took full control last August, really since Mike Ullman’s interim return to reverse Ron Johnson’s ill-advised, hasty dismissal of coupons and traditional Penney’s shoppers.

That swift about-face stemmed the implosion, but it only restored Penney to the vulnerable place it resided before many presumably smart people thought replacing Ullman with a retail executive of Johnson’s celebrated pedigree was the only salvation. 

Ellison, too, brought to Penney a heralded, if not as flashy, retail track record when he joined Penney as its CEO-designee from Home Depot on the cusp of the 2014 holiday season. Now, his task shifts to proving Penney can move steadily ahead of the pre-Johnson base and continue on that track. Otherwise, what has it really accomplished?

Focus On Basics

Retail observers credit Ellison’s initial focus on basics: supply chain efficiency; customer data mining and analysis; omnichannel integration and encouraging shoppers to add to their carts through such promotions as its recent “buy one, get one for a penny” deal.

Penney is still challenged by where it wants and needs to fit in today’s department store hierarchy as it works to retake market share, perhaps at an opportune time with several of its chief national competitors struggling. Sometimes it seems to have Macy’s or Kohl’s in its sights: see Penney’s private label apparel and home goods revival; and its intensified Sephora cosmetics rollout. Then it puts Sears on notice by adding major appliances and contact flooring departments in select stores.

Right Track

Penney still needs to balance a carefully updated, core middle-America value profile with front-edge merchandising and service to reunite with and retain its traditional, if aging, core customer while inviting and engaging younger shoppers that at some point need to predominate the retailer’s customer base.

It is probably premature to call J.C. Penney a turnaround.

But if you ask a dozen people today about J.C. Penney, you might get the same answer: There’s still plenty of work to be done, but it’s on the right track.