J.C. Penney takes a turn toward trendy

Chain proves department stores can make money

trendy fashions rejuvenate a 103-year-old brand


Connie Johnson this holiday season is doing something she never thought possible - buying all her gifts from J.C. Penney Co. Inc.

The Ellicott City nurse who considers herself fairly fashion-forward used to think the department store's selection of apparel was dowdy. Then one day while wandering through the store at The Mall in Columbia to get to another retailer, she noticed the clothes at J.C. Penney had become surprisingly trendy.

"At one time their clothes looked very cheap, but now they're up to par with Hecht Co. and they have excellent prices, too," said Johnson, loaded with sweat shirts and several Pierre Cardin shirt-and-tie sets for her husband and brothers.

In retailing's version of the tortoise and the hare, much attention has been heaped on industry giants Wal-Mart and Target, on Federated's creation of a national Macy's brand and on the marriage of Sears and Kmart. But one of the best performances this season is being posted by Penney's, the 103-year-old chain based in Plano, Texas, that caters to "middle America."

Penney has spent five years implementing a plan to rejuvenate its image and distinguish itself from other department stores, which as a group have failed to keep pace with a new generation of shoppers.

Penney's brought in fashionable designs such as nicole by Tracey Miller and Bisou Bisou, made its distribution and buying process more efficient and created an aggressive marketing campaign.

Its holiday-shopping television commercials, using Electric Light Orchestra's "Livin' Thing" of 1976 as theme music, are ubiquitous.

And so far, the efforts seem to be paying off.

Early sales figures show Penney is one of the few department stores winning customers back. It reported a 3.5 percent sales increase last month.

Federated Department Stores, whose stores include Macy's and Hecht's, reported a 3.4 percent decline last month.

Even upscale department stores, typically more immune to factors such as high gasoline prices, have struggled this season. Seattle-based Nordstrom Inc. posted a 2.8 percent increase in sales, less than the 4.6 percent increase that analysts expected. Saks Inc. saw a slim 0.1 percent sales increase for all its stores.

At the Penney store in Columbia recently, the lines were long even on a workday as customers picked up specials on everything from men's wallets and pajamas to lady's sweaters.

Penney was in worse shape in 2000. Its market share had slipped significantly as it lost ground to growing discounters and retailers more in tune with fashion trends. Analysts at the time said the company's stores were outdated, its merchandise stale and its marketing insignificant.

The company brought in retail veteran Allen Questrom, who reinvigorated Neiman Marcus in the late 1980s, led Federated out of bankruptcy in the 1990s and helped turn around Barney's New York.

Questrom put Penney's on a plan that focused on improving the shopping experience for customers.

New signs were installed and the checkout lines were moved into more accessible "customer service" clusters throughout the store.

Most important, a new emphasis was put on merchandise. Merchandise selection - most notably fashion - is the bread and butter of a department store.

"If you don't have the merchandise customers want, they have plenty of other places to go spend their money and they know it," said Ken Bernhardt, professor of marketing at the Robinson College of Business at Georgia State University in Atlanta.

"You've got a segment of people who have plenty of money and a closet full of clothes. So it takes something different and unique to attract those dollars," he said.

Penney had been keeping the core customer that had shopped its stores for years, but was losing the next generation.

"Mom went, but her daughter didn't keep going," said Richard Hastings, vice president and retail analyst at Bernard Sands in New York.

Under Questrom's direction, Penney overhauled a lot of the behind-the-scene functions, centralizing buying and distribution. Before, individual stores decided what to stock and ordered from vendors of their choice. There was little consistency between stores. A customer might see a shirt in one Penney location and attempt, without success, to buy it later at another.

Buying decisions once made at the store level are now made at headquarters. Support centers throughout the country now receive merchandise from vendors and ferry it out to different stores. Clothing is sorted at the centers and arrives at the stores hung in boxes - unlike before, when it came folded and often wrinkled. The new process makes for better presentation and allows Penney's buyers to better keep up with fashion trends.

The latest fashions could be found at the Columbia Mall store recently - sequined shrugs and tank tops, cropped jackets and jeans with rhinestones. High-fashion designer Michele Bohbot, who once sold her trendy line at the likes of Bloomingdale's, now has an exclusive contract with Penney.

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