J.C. Penney Considers Shops-Within-Shops Jugular To Future Success

by Holly Haber
From WWD Issue 05/23/2011

J.C. Penney Co. Inc. thinks it can increase sales by focusing on accessories and jewelry in its stores’ “center core” and accelerating its rollout of branded shop-in-shops, said Myron “Mike” Ullman 3rd, president and chief executive officer, during the company’s annual meeting Friday at its headquarters here.

“By enhancing the sense of discovery in our central core, there is a substantial upside, including increasing sales-per-square-foot and reinforcing J.C. Penney as a style destination,” he said.

Call It Spring fashion footwear by Aldo Group and MNG by Mango boutiques will both extend to 500 doors by fall, Ullman said, up from 100 and 292, respectively. Sephora, with 254 locations now, will be in 305 stores by the end of January. Call It Spring and Sephora are both generating sales-per-square-foot about three times the company average of $210, a spokeswoman noted.

In addition, the chain’s spring rollout of licensed Modern Bride jewelry collections to all 1,068 stores has spurred “strong gains” in the bridal business, Ullman noted.

He touted the company’s style and image transformation in 2010, epitomized by improved fashion offerings, the “Who knew?” ad campaign and a new streamlined logo.

The September launch of Liz Claiborne as an exclusive brand has exceeded expectations and continues to attract new shoppers, he noted. It also brought new items to Penney’s such as linen shirts, a fabric the retailer had virtually never carried, said Liz Sweeney, executive vice president and general merchandise manager of women’s, after the meeting.

“We’re very happy with Liz Claiborne, and it’s not just apparel — we’re very happy with handbags, fashion accessories, fashion jewelry and men’s as well,” she said.

Penney launched the brand with sportswear and has had a good reaction to the addition of dresses and swimwear this spring, she pointed out.

She sees Penney’s shoppers embracing seasonless dressing, items and faster fashion.

“I see them adapting new styles quickly, like the peasant top this spring — we sold it at the same time the higher-end stores sold it and to all ages,” she observed.

Penney’s is also growing its business with slimmer, modern-fit men’s clothing and shirts, said Steven Lawrence, executive vice president and general merchandise manager of men’s wear.

“Slim-fit dress shirts might be upwards of 30 or 40 percent of the assortment now, and [slimmer] tailored clothing might be 30 to 40 percent, where it used to be less than 10” percent of the clothing assortment, Lawrence noted.

The Find More touch-screen stands that facilitate online shopping are working in 100 stores, but rather than roll them out, Penney’s is tinkering with different digital formats for various departments. It’s currently running an experiment in about 20 stores to see whether iPads might be helpful tools for fine jewelry salespeople.

Progress At Liz Claiborne Defended By CEO McComb

by Lisa Lockwood
From WWD Issue 05/20/2011

Despite criticism from some shareholders, William L. McComb, chief executive officer of Liz Claiborne Inc., insisted the company was making progress on several fronts at the firm’s annual shareholders’ meeting Thursday morning.

“The fruits of our labors in restructuring the company have begun to show in a few meaningful areas,” McComb told shareholders, who gathered at the company’s 1441 Broadway headquarters. He cited the relaunch of the Liz Claiborne brand as an exclusive line for J.C. Penney Co. Inc. “It’s already proven to be profitable,” he said, and Penney’s has committed floor space and marketing to the brand. “The Liz Claiborne franchise is well on its way to achieve [Myron E.] ‘Mike’ Ullman’s [Penney’s chairman and chief executive officer] $1 billion sales goal,” said McComb, during the 20-minute meeting.

Based on channel, product and cost initiatives, McComb said he expects the partnered brands’ portfolio to be profitable in 2011. McComb said the Dana Buchman license with Kohl’s Corp. “is larger and more profitable than the previous rendition” of the Dana Buchman brand in 2006 in traditional higher-end department stores. He also noted that Claiborne has completely overhauled the Kate Spade business, which five years ago was a struggling brand “unable to execute.”

“The results are very strong. [Kate Spade] is an extremely profitable and high-growth business, with seemingly unlimited global potential,” said McComb of the brand, which generated $184.3 million in sales last year. Late Wednesday, Kate Spade said it had formed a major venture in Mainland China with the E. Land Group, with plans to grow to nearly 300 points of distribution by 2020.

As for some of the problem areas, he said, “the acceleration at Lucky Brand has been bumpier.” He pointed out that in the past year, the company has made major strides, and the brand is experiencing “solid, positive comp-door growth in our retail stores since mid-January,” a trend he expects to continue throughout the year.

He then addressed Juicy Couture, which is the company’s most profitable brand. Now predominantly a retail-based business domestically, he said the brand is in the midst of refreshing the product, marketing and stores. “We’re undergoing the same kind of internal transformation now with Juicy that we implemented two years ago at Kate Spade, and we could not have found a better person, LeAnn Nealz, our new creative director, to lead the charge.”

Finally, McComb turned to Mexx Europe. Although the retail division is still losing money and is undergoing major restructuring, he said through the fall, the wholesale division will have posted a full year of double-digit increases in bookings. “We continue to pursue our goal of break-even operating profit for the global brand by the end of 2012, and our ability to achieve this goal will significantly impact the total profit picture of the corporation,” he said.

For the year, Claiborne narrowed its loss to $251.5 million from $305.7 million. Revenues dropped 14.3 percent to $2.5 billion from $2.92 billion.

As part of the agenda, one stockholder, Kenneth Steiner, proposed shareholder action by written consent, in lieu of a meeting. Steiner took the opportunity to air some complaints about the company. He said Claiborne has seven directors who have been there since before 2006 and are “overseeing the disastrous collapse of the company.” He said “sales are way down, the company has had three losses in a row, and even the first quarter was a very poor one.

“We have extreme overcompensation of you, the ceo, making millions and millions of dollars, while shareholders like I have lost over 90 percent on this stock. That’s ridiculous,” said Steiner. “The stock has completely collapsed. Someone has to be held accountable, but the directors don’t want to hold themselves accountable, nor the ceo. It’s now the shareholders’ responsibility to do so,” said Steiner. Although the company did not support the proposal, it was passed.

During the question-and-answer period, one shareholder said she was in the Juicy Couture store on Madison Avenue and “it’s just blah now. There’s nothing special about it. The clothing, the colors...”

McComb said the store is largely focused on Bird, an elevated brand targeting the 35- to 45-year-old woman. She then asked why Juicy got rid of its founders, Pamela Skaist-Levy and Gela Nash-Taylor, and McComb said their contract had ended. “That was always planned. They were owners and they moved onto other things.”

Penney CEO's Pay Package up 48 Percent in 2010

Penney CEO Myron Ullman receives $12.3 million pay package in 2010, a 48 percent increase

The Associated Press
By Anne D'Innocenzio

Department store operator J.C. Penney Co.'s Chairman and Chief Executive, Myron E. Ullman III, received compensation worth $12.3 million in 2010, a 48 percent increase from 2009, as the company's revenue and market share rose, according to an analysis by The Associated Press.

Ullman, 64, received a base salary of $1.5 million and a performance-based cash bonus of $2.56 million in the fiscal year that ended Jan. 29, according to a filing by the company made with the Securities and Exchange Commission late Tuesday.

But the bulk of Ullman's compensation came in the form of stock awards valued at almost $6.4 million when they were granted, which quadrupled from $1.28 million in 2009. He also received stock options valued at $1.59 million, virtually the same as 2009. His other compensation, worth $237,937, included personal use of corporate aircraft and home security systems.

In 2009, Ullman, who has been CEO and chairman since 2004, received compensation worth $8.29 million.

Like many department stores, J.C. Penney faced a slump in sales during the recession, but the company has worked hard under Ullman's leadership to turn around by expanding its offerings exclusive merchandise that differentiates it from competitors and by cutting costs. It closed some stores, outlets and call centers, and it will soon finish closing its catalog business.

Last fall, Penney became the only U.S. retailer selling the Liz Claiborne and Claiborne women's wear brands (the Liz Claiborne New York brand went to QVC). Penney's also is the only department store selling MG by Mango, a European brand.

For the latest fiscal year, J.C. Penney reported its net income rose 55 percent to $389 million from $251 million in fiscal 2009, and its revenue rose 1.2 percent to $17.75 billion.

For the year, the key revenue measure of revenue at stores open at least a year rose 2.5 percent. The figure is considered a key indicator of a retailer's health because it excludes stores that recently opened or closed.

The Associated Press formula calculates an executive's total compensation during the last fiscal year by adding salary, bonuses, perks, above-market interest the company pays on deferred compensation and the estimated value of stock and stock options awarded during the year. The AP formula does not count changes in the present value of pension benefits. That makes the AP total slightly different in most cases from the total reported by companies to the Securities and Exchange Commission.

The value that a company assigned to an executive's stock and option awards for 2010 was the present value of what the company expected the awards to be worth to the executive over time. Companies use one of several formulas to calculate that value. However, the number is just an estimate, and what an executive ultimately receives will depend on the performance of the company's stock in the years after the awards are granted. Most stock compensation programs require an executive to wait a specified amount of time to receive shares or exercise options.