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JCPenney executives have targeted "starting out" singles and newly marrieds, and "modern spenders" as the demographic groups thus far indifferently pursued, and with the most potential for growth. As part of its overall revamp, JCPenney has reduced a private label selection that has included as many as 50 brands over the years down to 8.
Executives identify `power brands' as magnets for Generations X, Y
NEW YORK - With Wall Streeters alternately calling for the ouster of ceo James Oesterreicher and the spin-off of the Eckerd Drug division, JCPenney executives have been turning up at analyst meetings and industry events in recent weeks to outline research and plans the company hopes to build upon to turn around sagging department store operations.
Speaking on April 13 at the Fashion Institute of Technology's 10th Annual Herbert Blueweiss Key Issues Seminar, Marilee Cumming, president of merchandising, JCPenney Stores and Catalogs, said research has helped the company divide shoppers into five categories: "starting out" singles and newly marrieds, "modern spenders" with young families, "savvy" shoppers, "transitioning" consumers and "golden years."
Two of the five, those designated as starting out and modern spenders, have been identified as key opportunities thus far indifferently pursued. Penney has been accused of letting its customer base grow old by observers, and Cumming's identification of starting out and modern shoppers as objects of urgency isn't surprising.
Cumming identified modern spenders as dual-income adults 35 to 54 years old who represent about 27% of current JCPenney shoppers, or about 11 million consumers. The starting out group is generally under 35 and represents about 20% of current Penny's shoppers, or about 7.6 million consumers.
In looking at the research, Cumming said, JCPenney executives have decided that the best way to rejuvenate the company is to address the targeted groups through its private label programs. "We saw an opportunity," she said. "We have strong private brands where we can deliver more value."
As part of its overall revamp, JCPenney has reduced a private label selection that has included as many as 50 brands over the years down to eight. Those eight "power brands," said Cumming, represent about $5 billion in business and include Arizona, St. John's Bay, Stafford, USA Olympic, Hunt Club, JCPenney Home Collection, Worthington and Jacqueline Ferrar
To bolster merchandising efforts, the company is developing in-store boutiques to raise the profile of private labels and exclusive brands such as Crazy Horse from Liz Claiborne and Evan Picone, which is being relaunched at JCPenney. A new overall store prototype that, like Penney's other efforts, focuses on its two key targeted customer groups, is being readied for June.
Despite those efforts, Cumming pointed out, the chain isn't abandoning national labels. "Private brands aren't going to be the only thing available at JCPenney," she said. "I think our customer expects to find moderately priced national brands."
JCPenney has been dispatching executives near and far to trumpet its new approach. After the FIT seminar, Cumming hurried across town to spread the news at a PaineWebber conference. Later that week, J. Raymond Pierce, president of brand development, appeared at a conference at the University of Florida's Center for Retailing Education and Research to tout the company's efforts. He talked up St. John's Bay, a critical label that is targeted at the young adult consumer at the heart of JCPenney's rejuvenation project. "The brand is growing and will soon rival Arizona," he said.
Even Oesterreicher has gotten in on the act and, as early as March 11, offered the first outlines of Penney's plans at a Merrill Lynch conference, addressing questions of leadership at the store by noting that the company had brought in new management thinking through acquisitions and the hiring of Frank Newman, chairman and ceo at Eckerd.
That hasn't silenced the financial dogs that are hounding the company. Shareholders want to see a department store turnaround and quickly.
For the five weeks ended April 3, the company's total revenues were up 9.7% to $3 billion, but department store sales off two percent to $1.33 billion, with comps off by 0.7%. Eckerd, in the meantime, posted gains of 26.3% to $1.22 billion with comp gains of 16.8%.
Copyright Lebhar-Friedman, Inc. May 3, 1999