J. C. Penney Company, Inc.

Analysis
Brooke Rea
BPS 4305.502
University of Texas at Dallas
5/2/2015

Executive Summary

J. C. Penney is a department retailer selling family apparel, accessories, and home furnishings; as
well as providing services such as a styling salon, optical, portrait photography, and custom
decorating. The following narrative was commissioned to conduct a thorough business analysis
regarding the overall operations of J. C. Penney Corporation which includes in-depth
investigation of J. C. Penneys (1) Financial performance, (2) External Analysis of market
condition, (3) Internal Analysis, (4) An insightful identification of J. C. Penneys strategy, and
(4) Comprehensive Recommendations for J. C. Penney to follow to improve its ill-performing
business. These Comprehensive Recommendations include (1) Rationalizing its product line, (2)
Continuing and expanding promotions and couponing, (3) Relocating outlet locations away from
shopping malls, and (4) Conduct a human resource revitalization effort. At the current time, J.
C. Penney is one of the oldest department retailers in America and deserves nothing short of
strong financial longevity. The following report is the first step towards that continued
operation.

J. C. Penney Company, Inc.

TABLE OF CONTENTS
INTRODUCTION

FINANCIAL ANALYSIS

OVERVIEW
NET INCOME
CURRENT RATIO
TOTAL DEBT RATIO
PROFIT MARGIN
INVENTORY TURNOVER

2
3
4
5
6
7

EXTERNAL ANALYSIS

OVERVIEW
THREAT OF NEW ENTRANTS
THREAT OF SUBSTITUTE PRODUCTS AND SERVICES
BARGAINING POWER OF BUYERS
BARGAINING POWER OF SUPPLIERS
INTENSITY OF COMPETITIVE RIVALRY

7
8
9
9
10
10

INTERNAL ANALYSIS

10

OVERVIEW
STRENGTHS
WEAKNESSES
VALUE CHAIN ANALYSIS
RESOURCES OF NEW MARKETS WITH KEY STRATEGIES

10
11
12
13
14

IDENTIFICATION OF STRATEGY

15

STRATEGY POINTS FOR J. C. PENNEY

STRATEGY POINTS FOR DILLARDS
STRATEGY POINTS FOR KOHLS
STRATEGY SUMMARY TABLES

16
16
16
17

RECOMMENDATIONS

19

J. C. Penney Company, Inc.

Introduction
J. C. Penney Company, Inc. is a holding company whose principal operating subsidiary is J. C.
Penney Corporation, Inc. (JCP). JCP was incorporated in Delaware in 1924, and J. C. Penney
Company, Inc. was incorporated in Delaware in 2002, when the holding company structure was
implemented. The new holding company assumed the name J. C. Penney Company, Inc. The
holding company has no independent assets or operations, and no direct subsidiaries other than
JCP. Common stock of the Company is publicly traded under the symbol JCP on the New
York Stock Exchange. Since our founding by James Cash Penney in 1902, we have grown to be
a major retailer, operating 1,062 department stores in 49 states and Puerto Rico as of January 31,
2015. Our business consists of selling merchandise and services to consumers through our
department stores and our website at jcpenney.com, which utilizes fully optimized applications
for desktop, mobile and tablet devices. Our department stores and website generally serve the
same type of customers and provide virtually the same mix of merchandise, and our department
stores accept returns from sales made in stores and via our website. We fulfill online customer
purchases by direct shipment to the customer from our distribution facilities and stores or from
our suppliers' warehouses and by in store customer pick up. We sell family apparel and footwear,
accessories, fine and fashion jewelry, beauty products through Sephora inside JCPenney and
home furnishings. In addition, our department stores provide our customers with services such as
styling salon, optical, portrait photography and custom decorating.(J. C. Penney Company Inc.
2014 10-K Report)

J. C. Penney Company, Inc.

Financial Analysis
Overview
Financial health of any corporation is a product of many factors. Beginning in 2013, JCPenney
underwent a transition of strategies to regain lost sales and market position. According to the
10K Filing, JCPenney looked to undo merchandising and pricing strategies [that] did not
resonate with our customers. JCPenneys profitability is dependent upon their ability to source
and sell merchandise to customers in a timely manner, at a great price, and for great quality. For
all companies, financial health is an ability to meet financial obligations and maintaining
operations for growth into the future. Several pertinent ratios (and financial data) go into
determine a company's financial health. For our particular analysis towards JCPenney, we will
focus on Net Income, Profit Margin, Current Ratio, Debt Ratio, and Inventory Turnover.
We will also include similar analysis in the above areas for JCPenneys competitors Kohls and
Dillards to paint an adequate, relative market picture.

J. C. Penney Company, Inc.

Net Income
Net income is a company's total earnings and is simply a measure of profit of the company. It is
often called The Bottom Line since it appears at the bottom of an income statement. For
JCPenney, net income has been in the severe negative in the past few years. The graph below
shows how JCPenney has performed since 2013. While they have seen less negativity from
2013 to 2015, they have reported net income losses. Compare that to Dillards and Kohls who
have operated with positive incomes. It is also worth mentioning that it appears all three
competitors are experiencing some market conditions since all three have the same net income
trajectories from 2013 to 2014 to 2015. We can ascertain that other market forces are working
here against JCPenney, Kohls, and Dillards.

Net Income
1,500,000
1,000,000
500,000
(500,000)

Jan-13

Jan-14

Jan-15

(1,000,000)
(1,500,000)
(2,000,000)
JCP

Kohl's

Dillards's

JCP, Inc: Income Statement 2011-2015. Mergent Online. Web 15 April, 2015.

J. C. Penney Company, Inc.

Current Ratio
The Current Ratio (Current Assets/Current Liabilities) measures a company's ability to pay
short-term obligations. Ratios under 1 indicate that a company would not be able to pay off its
debts if they came due at that point in time. The higher the current ratio, the more capable the
company at paying its debts and obligations. The current ratio gives insight to the efficiency

within an operating cycle and to the ability to turn its product into cash. Surveying the chart
below, we can see that JCPenney has the lowest current ratio of all three companies, while it is
still above the magic threshold of 1. Dillards is in the best position of with a current ratio above
2. Summary: JCPenney has the lowest current ratio and the lowest capability to pay its short term
obligations.

Current Ratio
2.5000
2.0000
1.5000
1.0000
0.5000
0.0000
Jan-13

Jan-14
JCP

Kohl's

Jan-15

Dillards's

JCP, Inc: Balance Sheet 2011-2015. Mergent Online. Web 15 April, 2015.

J. C. Penney Company, Inc.

Total Debt Ratio

The debt ratio is given as a percentage is the proportion of a companys assets that are financed
by debt. The higher this ratio, the more leveraged the company is; hence, the greater its
financial risk. Debt ratios greater than 1 indicate a company has more debt than assets. Debt
ratios less than 1 indicate that a company has more assets than debt. JCPenney operates with the
highest debt ratio. They are under the threshold of 1, but as of 2015 they are operating at 82%.
Summary: JCPenney is the highest and its assets are financed.

Total Debt Ratio

0.9000
0.8000
0.7000
0.6000
0.5000
0.4000
0.3000
0.2000
0.1000
0.0000
Jan-13

Jan-14
JCP

Kohl's

Jan-15

Dillards's

JCP, Inc Balance Sheet 2011-2015. Mergent Online. Web 15 April, 2015.

J. C. Penney Company, Inc.

Profit Margin
Profit Margin (net income divided by revenues) measures how much out of every dollar of sales
a company actually keeps in earnings. Profit margin is very useful when comparing companies
in similar industries, like retail department stores. A higher profit margin indicates a more
profitable company that has better control over its costs. Looking at the figure below, we
quickly realize that JCPenney is operating beyond its means, with the negative margin.
Conversely, Kohls and Dillards contribute significant more portions of every dollar to earnings.
Summary: JCPenneys profit margin is well below desired level.

Profit Margin
0.1000
0.0500
0.0000
Jan-13

Jan-14

Jan-15

-0.0500
-0.1000
-0.1500
JCP

Kohl's

Dillards's

JCP, Inc: Income Statement 2011-2015. Mergent Online. Web 15 April, 2015.

J. C. Penney Company, Inc.

Inventory Turnover
Inventory turn refers to how many times a company's inventory is sold then replaced over a period
of time, usually calculated every month then every year. A low turnover implies poor sales and,

therefore, excess inventory. A high ratio implies either strong sales. A low turnover is usually a
bad sign because products tend to deteriorate or in the retail segment, grow unfashionable the
longer they sit. Below is the current turnover for JCPenney, Kohls, and Dillards. JCPenney is
performing strong with a higher turnover. Dillards, while not the subject of this review, and
needs further investigation explaining the less than 1 turnover.
Summary: Keep up the good work JCPenney inventory turnover in retail keeps foot traffic up
and sales rising.

Inventory Turnover

JCPenney

Kohl's

Dillard's

2.8508

3.1200

0.6872

JCP, Inc: Income Statement 2011-2015. Mergent Online. Web 15 April, 2015.

External Analysis JCP

Overview
External Analysis of JCPenney will investigate and provide overview of the general business
environment of department stores, the industry dynamics, and market competition facing
JCPenney. This review will also provide commentary to JCPenneys ability to operate
successfully within the context of Porters Five Forces Model. As a reminder, Porters Five
Forces are:
1. Threat of New Entrants
2. Threat of Substitutes
3. Bargaining Power of Consumers (Buyers)

J. C. Penney Company, Inc.

4. Bargaining Power of Suppliers

5. Intensity of Competitive Rivalry
Department stores are a part of consumer spend sector known as discretionary spend or
discretionary sector, meaning that as consumers have more or less disposable income, their
ability to shop in this category reflects directly. The product line offered by JCPenney relies
largely on consumers having disposable income to purchase the clothing, accessories, furniture,
and household items. Additionally, department stores are equally impacted by other industries.
While there is some buffering between industries, retail shopping (department stores) are
impacted by events and changes in related economic sectors like shipping, farming, labor, and
banking. JCPenney faces several layers of competition in retail. JCPenney finds itself
competing across a wide spectrum of fellow retailers, from the high end Macys to low end Sears
along with stand-alone retailers like Kohls and Belk. Market competition is fierce in the
department store sector of the economy, with JCPenney not quite fitting in any particular price
segment.
Threat of New Entrants
The first labeled force in Porters analysis is the Threat of new Entrants. It is one of two
horizontal forces that play upon industry rivalry and dynamics. This portion is most active when
profitability is high, when there are few players in the market, and when the barriers to entry are
minimal or non-existent. JCPenney finds itself in a retail market that has a mild but real threat to
new entrants (the potential is there for new-comers and expansion). With the existence of
barriers to entry, JCPenney is somewhat protected from this particular rivalry threat (it is
nonetheless threatened from substitute competitors as mentioned below). Current market forces
such as multiple pre-existing retailers contributing to brand loyalty, capital requirements for

J. C. Penney Company, Inc.

better product selection, and minimal abilities for product differentiation barricade new retailers
from entering the department store market. While new department store retailers are possible,
the real potential is through expansion and store front growth from already existing companies
like Belk, TJ Max, and Sears.
Threat of Substitute Products and Services
The second labeled force in Porters analysis is the Threat of Substitute Products and Services. It
is the second of two horizontal forces that play upon industry rivalry and dynamics. The threat
of substitute products and services works in parallel with the new entrant threat. With the
current department retailers like Sears, Dillards, Macys, and Kohls having been in place for
some now, new growth stores like Belk, TJ Max Home Goods, and Steinmart are gaining market
share and larger foot print. These retailers serve as viable substitutes since JCPenney appears to
have an identity crisis with its recent CEO, merchandise, and marketing changes (They are
engaged in a turnaround strategy to stabilize business and rebuild the Company in an effort to
reconnect with core customers). In the meantime, competitors are emerging on the retail market
with stronger product lines like Macys and Dillards, better pricing such as Sears and Kohls,
and wider home good varieties like TJ Max Home Goods and Belk due to minor barriers to
expansion. These barriers include distribution access, capital requirements for inventory, and
infrastructure existence. All of these are currently easily mitigated which is allowing consumers
to choose better suited retailers versus JCPenney.
Bargaining Power of Buyers
Many factors account for the consumers bargaining power, including price, quality, style,
service, product availability, and convenience. The bargaining power of customers is the ability
of consumers to affects the price changes from the vender. This is first vertical force that is part

J. C. Penney Company, Inc.

of Porters Forces that which make up industry dynamics. This force is based on the consumer
having many alternatives and choices as it relates to a firms product line. Firms seek to
minimize the bargaining power, usually through loyalty programs and store location.
Bargaining Power of Suppliers
The bargaining power of suppliers is referred to as the market of inputs, such raw materials,
miscellaneous components, labor, expertise, and specific products exclusive to the company.
This is the second vertical pressure placed on the firm in the Porter model. This pressure is a
source of power when there are few substitutes for which the firm can draw upon. JCPenney has
a diversified supplier base and is not dependent on any single supplier. They enjoy products from
over 2,000 domestic and foreign suppliers, many of which are long term.
Intensity of Competitive Rivalry
This force is the major source of the competitiveness. It is based on several factors including
competitive advantage, advertising leverage, overall strategy, the firms transparency, and the
companys concentration ratio. Rivalry amongst department stores and retail shopping outlets is
extremely competitive. Even though JCPenney is one of the largest department store and ecommerce retailers in the United States, they compete with brick and mortar firms as well as online only retailers on numerous fronts.

Internal Analysis
Overview
Internal Analysis of JCPenney will investigate and provide overview of the general business
strength and weaknesses found inside JCPenney of which they bring to the competitive
department store environment. This review will provide commentary to JCPenneys ability to
operate successfully from a value chain approach, highlighting its strengths and weaknesses.

J. C. Penney Company, Inc.

10

JCPenneys strengths include having established historic name recognition, immense product
and service selection, highly sought after shopping convenience (via storefront or online), and
attractive credit and loyalty program availability to consumers. JCPenneys weaknesses include
a poor marketing image, uncompetitive product selection, and poor financial performance
resulting in multiple human resource issues.
Strengths
Over the last two years, JCPenneys stock price has nose-dived from over $17.00 per share to
just over $8.00 currently. JCPenney, despite its recent lack luster performance, carries several
strengths that could capitalize into stronger financial performance in the department store
industry. These strengths include having established historic name recognition, immense
product and service selection, highly sought after shopping convenience (via storefront or
online), and attractive credit and loyalty program availability to consumers. JCPenney has been
in incorporated since 1924, having been founded since 1902. With over 1,000 stores nationwide,
JCPenney is a recognizable stable in the department store industry with known prominence in
shopping malls across America. With this long-term establishment, only the small few will not
know what JCPenney sells. JCPenney consists of selling an immense product line along with a
few service selections, like hair styling and family photography. Their core product selection is
mens womens and childrens apparel, home merchandise, and apparel accessories. With their
wide variety of goods and selection, a typical family will find a lot of what they need. JCPenney
has stayed true to the modern times by offering shopping in both stores and online. This
provides shoppers another avenue to wider products that there local JCPenney may not have.
JCPenney also boasts strong credit availability and operates a special loyalty program. These
offerings keep customers engaged in JCPenneys product line.

J. C. Penney Company, Inc.

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Weaknesses
JCPenney operates in a highly competitive industry, on a local, regional, and national stage. The
competition ranges from other department stores to specialized retailers (i.e. competing with
Dillards then with Annas Linens). Recently JCPenney has seen a financial downturn largely in
part due to the multiple weaknesses within their operations. These include a poor marketing
image, uncompetitive product selection, and poor financial performance resulting in multiple
human resource issues. JCPenney for many years has residing exclusively in large retail
shopping malls. While there are still some upscale malls out there, research (and JCPs own
10K) has shown that the major mall shopping is in decline, of which JCPenney has most of its
stores. JCPenney has been labeled a low quality provider because they have failed to stay
modern by moving into the independent storefront arena, similar to the way Kohls has operated.
Additionally, JCPenney has suffered from a poor marketing image due to the recent financial
headlines plaguing the company. Both of these weaken the companys performance. A further
weakness affecting JCPenney is the lack luster department store selection. While the types of
merchandise sold is strong ranging from Mens apparel to home goods to linens to jewelry, the
competitive selection within each of those categories is limited. For example, while a consumer
would know to shop at JCPenney for home furnishings, the selection is limited; or a consumer
would know that that JCPenney offered living room furniture; there selection is only of two
styles. Recent poor financial performance has resulted in multiple human resource issues. With
the recent poor financial performance, JCPenney has been unable to pay additional wages and
bonuses to employees; thus furthering already high employee turnover. Not having a bright,
engaged work force with the company only diminishes the available service provided. Weak
financial performance forces employees to take on additional roles and duties spreading the

J. C. Penney Company, Inc.

12

talent pool to thin. An employee is made to be a jack of all trades, but a master at none. As
covered in their 10K, The failure to retain, attract, and motivate our employees, including key
positions, could have an adverse impact on our results of operations.
Value Chain Analysis
The Value Chain Analysis describes five generic categories of primary activities that span across
any industry. The primary activities are Inbound Logistics, Operations, Outbound Logistics,
Marketing and Sales, and Service. JCPenney operates a logistics system through distribution
centers strategically located in 5 states. Their supply chain network operates 25 facilities at 14
locations including 11 store merchandise distribution centers, 7 regional warehouses, 3
jcpenney.com centers, and 4 furniture distribution centers. This network is adequate to meet
selection and delivery needs for both retail outlets and online orders. Overall the inbound
logistics, operations, and outbound logistics for JCPenney are on par with rivals and those
outside the department store industry. This is a key source of competitive advantage. Marketing
and Sales include the activities related to entice the consumers to purchase the goods and
services from JCPenney. This includes advertising, promotion, sales force, and pricing. This
particular portion of the value chain is where JCPenney remains uncompetitive. In 2014
JCPenney continued its turnaround strategy, seeking to reconnect with customers. JCPenney has
recognized the need to increase customer traffic in its stores. One of their Marketing and Sales
strategies is to increase mark down pricing and sales promotions. One failed attempt at this
occurred a few years back when JCPenney offered even numbered, strict pricing without the
discounted sales promotion. This failed. It produced an image of JCPenney as low quality and
unable to offer a deal. JCPenney offers multiple incentives to customers via their rewards
programs, TV advertising, and online promotions. While this is amount of enticement is on par

J. C. Penney Company, Inc.

13

with fellow retailers like Dillards and Kohls, it fails to yield the operating and sales results
desired. As stated in their 10K, Our ability to increase sales and store productivity is largely
dependent upon our ability to increase customer traffic and conversion.
Resources for New Markets with Key Strategies
Looking forward into 2015, JCPenney has several avenues and resources to reach existing
markets, new markets, and continued turnaround from the recent poor financial performance.
JCPenney must follow a few key strategies through capitalizing on existing strengths and
mitigating the weaknesses and failures of the past five years. Two key strategies, outlet location
move and a merchandise revamp, will reach new markets as well as regain lost ground in
previously lost segments. First, JCPenney must make a clear and decisive departure from their
current store locations at malls to more free standing outlets. With the decline in mall shopping
traffic, this affects JCPenney immensely since they are already experiencing a decrease. While
this strategic move will take multiple years and significant capital, the added consumer traffic
and associated indirect rebranding that will occur is critical for JCPenneys long term
sustainability. Second, JCPenney is in dire need of product line right sizing and re-focus. As
covered previously, JCPenney offers a wide array of merchandise that is suited for families and
individuals. While its a wide array, the selection is limited. For example, JCPenney might offer
home furniture the selection is only of two styles. The better key strategy is to discontinue the
furniture line and allocate those dollars and resources towards a better selling commodity.
Furthermore, JCPenney needs to standardize and bring consistency to store inventory. After
further in store research, it was determine that locations only a few miles apart offered vastly
different lines. While some variance is desired to account for local consumer tastes, what was
noted was as different as night and day. The limited selection at both locations failed to justify

J. C. Penney Company, Inc.

14

the foot traffic and braving a visit to the already dreaded shopping mall. JCPenney needs to
determine the strongest sales opportunities, and expand and standardize; hence, scrubbing itself
of the lack luster product lines.

Identification of Strategy - JCPenney, Dillards, and Kohls

JCPenneys business model consists of selling merchandise to various consumer segments
through department stores and via online at jcpenney.com. With the department store/retail
industry being extremely competitive, JCPenney fundamentally competes with multiple retailers
including Dillards, Kohls, Sears, Macys, Belk, and Steinmart. The main focus of this review
will be placed on JCPenneys primary competition: Dillards and Kohls. The department store
and retail shopping industry is highly competitive, requiring a strong commitment to consumers
micro-economic condition and a well-articulated corporate strategy. Currently, as stated from
their website, JCPenney is Dedicated to fitting the diversity of America with unparalleled style,
quality, and value. Across approximately 1,060 stores and at JCPenney.com, customers will
discover a broad assortment of national, private, and exclusive brands to fit all shapes, sizes,
colors, and wallets. JCPenneys current strategy began a few years ago as a result of some
tumultuous financial results. JCPenney engaged in a multi-year stabilization effort to rebuild
reconnect with core customers previously lost.
The following breakdown highlights the key strategy points for not only JCPenney, but its
primary competitors: Dillards and Kohls.

J. C. Penney Company, Inc.

15

Strategy Points for JCPenney:

Multi-year stabilization effort to rebuild JCPenney and reconnect with core customers
previously lost

Revitalize key areas of beauty, jewelry, shoes, handbags, and accessories

Discontinuing trendy brands and bring back previously successful store labels.

Expand e-Commerce and bring back the classic JCPenney printed catalog.

Continue offering incentives via JCPenney rewards program to increase foot traffic. J C
Penney offers a point system based on individual spend that accumulates to in-store cash.

JCP offers a credit line with special financing and coupons for credit holders only.

Strategy Points for Dillards:

Trimming store count to minimize costs and drive up the image of exclusivity

Focus is largely on middle to upper middle income retail segment

Largest focus is on apparel and home furnishings via name brand and private label.

Entirely mall based, identical to JCPenney only at a higher price point and perceived
quality serving as the primary competitor (location specific).

Only offering incentives via Dillards credit line, not offering sale specials or extensive
advertising for foot traffic.

Strategy Points for Kohls:

One of the fastest growing retailers which is entirely based away from malls. This is
opposite of Dillards but at the same relative price point as JCPenneys.

Offers a large selection of primarily apparel for men and women, but also offering an
extensive line of home furnishings. Kohls is a direct competitor at this level rather than
Dillards at a higher perceived price and quality.

J. C. Penney Company, Inc.

16

Continue to offer a rewards system for repeat shopping. Kohls offers an in-store cash
system based on individual spend that accumulates to further in-store cash. (Kohls cash)

Offers multiple sales discounts and specials frequently throughout the year to maintain foot
traffic. JCPenney follows suit but is still recovering from a bad pricing strategy a few years
ago. Dillards limits its special sales, still showcasing itself with some level of exclusivity.

The Retail Industry is highly competitive and that results in department stores adopting
strategies that focus on certain objectives with the consumer. As with each action, there is
economic balance required and risk exposure. The following Strategy Summary Tables indicate
the main facets of each firms strategy (reaching out to consumer shopping segments in retail)
and summarizes its focus, risk, and impact on the focal firm JCPenney.
Strategy Summary Tables
JCPenney
Strategy Highlight
Multi-year
stabilization effort to
rebuild JCPenney
Revitalize key areas
of beauty, jewelry,
shoes, handbags, and
accessories
Discontinuing trendy
brands; bring back
previously successful
store labels
Expand e-Commerce
and bring back the
classic JCPenney
printed catalog

Focus and Impact

Reconnect with
core customers
previously lost

Risk

Stabilization may not

be possible due to
macro-economic
conditions
Reconnect with
Revitalization may
consumers but also not resonate with
reach a new
current or potential
market segment
JCP consumers
Reconnect with
May not resonate with
core customers
current or potential
previously lost and JCP consumers
attract new ones
Reach out to non- Website security of
traditional
consumer information
shoppers looking
is paramount as well
for convenience
as proper non-regional
pricing.

Impact on JCPenney
Consumer re-connect may not
be possible.

Further decline in sales, foot

traffic, and favorable retail
image, or expanded sales due
to rebranding.
Further decline in sales, foot
traffic, and favorable retail
image, or expanded sales due
to rebranding.
Possible sales growth
including offering not-in-store
products and easy shopping.

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17

Dillards
Strategy Highlight
Trimming store count
and maintaining
stores only in retail
shopping malls

Focus largely on
middle/upper middle
income retail
segment
Largest focus on
apparel and home
furnishings via name
brand/private label

Focus and Impact

Right sizing the
number of stores
to minimize costs
and drive up the
image of
exclusivity
Drive up the image
of exclusivity as
well as
maintaining the
higher price point
Focusing on wide
product
availability at an
upper end pricing

Impact on JCPenney
With Dillards being a mall location rival, consumers
not finding what they like will put forth the additional
expense for a better product and shopping experience.

If JCPenney fails to reach its consumers with their

desired fashion at the right price point, consumers could
leave JCPenney and flock to Dillards, for only the
slight increase in price.
Since Dillards is a location competitor, JCPenney must
maintain a cutting edge product line, a traditional line,
as well as provide a solid customer service base.

Kohls
Strategy Highlight
Free standing entirely
based away from
malls

Offers a large
selection of apparel
and an extensive line
of home furnishings
Offer a rewards
system for repeat
shopping: in-store
cash system
Offers multiple sales
discounts and specials
frequently throughout
the year to maintain
foot traffic

Focus and Impact

Capitalize on
current consumer
trend of strip mall
shopping and inneighborhood
availability.
Focus is placed on
product, size,
fashion, and
current
furnishings.
Creates increased
foot traffic and
frequent repeat
shoppers for high
inventory turnover.
Creates increased
consumer buzz
and frequent repeat
shoppers for high
inventory turnover.

Impact on JCPenney
Consumers will often choose a more local provider.
Recent studies have indicated that mall traffic is on the
decline and Kohls is set to quickly capitalize on this.
With retail shopping being a portion of discretionary
spend, some consumers will simply go to Kohls and
avoid JCPenney all together.
If JCPenney fails to reach its consumers with their
desired fashion at the right price point, consumers
could leave JCPenney and shop closer to home at the
same price point; thereby avoiding malls. The result
could be loss of foot traffic and sales.
The more aggressive the Kohls rewards, a more
natural propensity for a price war will ensue.
JCPenney should counter with aggressive rewards, but
that could limit profits.
The more aggressive the Kohls sales specials and
discounts, JCPenney will be forced to offer aggressive
price reductions and advertising sales, but that could
limit profits and margins.

J. C. Penney Company, Inc.

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Recommendations
JCPenney has undergone a transformational period in the recent years. With the poor financial
performance in recent times, JCPenney went through two CEOs and several marketing and
merchandising strategies, all with no success. Based on first hand retail research and review of
JCPenneys 10K from 2011 and 2015, the following recommendations can be made:
1. Rationalize all product lines offered by JCPenney. At the current time, JCPenney stores
offer a wide array for apparel, accessories, and home furnishings. JCPenney needs to
return to their roots of high quality, affordable brands of clothing and accessories made
for the mature professional. JCPenney should continue to offer home furnishings like
bedding, small kitchen appliances, and decorative home goods; but then JCPenney must
also discontinue poor selling and one-off items like furniture and exercise equipment.
2. JCPenney needs to continue its coupon and in-store sales promotions, even expanding
them to increase foot traffic and directly compete with retailers like Kohls. Consumers
love a deal, and its these sales promotions and coupons that instill that getting a deal in
JCPenneys customers.
3. JCPenney needs to undertake a broad based departure from mall locations to freestanding/strip mall locations. They must retain store outlets in only newer or upper end
mall locations, knowing that mall foot traffic on the decline and shoppers preferring more
local residential type outlets. This will directly compete with Kohls and provide easier
access for potential shoppers that avoid large shopping malls.
4. JCPenney should cap the above changes with a well-promoted corporate image strategy
highlighting the glamor and advantages of working for JCPenney. JCPenney has suffered
from layoffs and a resulting poor image of not being a good place to work. JCPenney

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needs to staff additional personnel in stores as well as offer new positions at the corporate
level. JCPenney needs to transform its human resource with the ultimate goal of being a
top tier employer.
JCPenney has seen poor financial performance in recent times (notice that net income is in the
severe negative). Commitment to the above strategies is crucial to continue the reconnection
JCPenney is seeking with its customers and improving its financial performance. Implementing
the above recommendations requires deliberate, strategic planning. A well rounded strategic
implementation plan will include a multi-phase merchandise rationalization effort; to include a
study on JCPenney merchandise sales statistics on historical best sellers. The second piece will
include a multi-phase pricing and couponing enhancement effort; to include real time econometric
impact amounts to steer the best sales promotions. The third retail outlet location shift must be
implemented over the long term. Departing from the normal locations (shopping malls) will
require large capital investments. The logistics of operating in all new locations is a large
constraint, overcome with added foot traffic and convenience of sales. Finally, as a last piece of
the strategic outline, a human resource rejuvenation campaign is a must. With the layoffs in
recent times, JCPenney needs to phase in added personnel and engage in a broad media campaign
to highlight JCPenney as a top tier employer. The added labor expense is constraining, but
having strong employment ties within the community pays tenfold.

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Works Cited
J. C. Penney Company Inc. 2014 10-K Report. J.C. Penney Company Inc, 2013. Web. 15 April,
2015. http://ir.jcpenney.com/phoenix.zhtml?c=70528&p=irol-irHome
J. C. Penney Company Inc. 2012 10-K Report. J.C. Penney Company Inc, 2013. Web. 27
January, 2015. http://ir.jcpenney.com/phoenix.zhtml?c=70528&p=irol-reportsAnnual
JCP, Inc: Balance Sheet 2011-2015. Mergent Online. Web 15 April, 2015.
http://www.mergentonline.com.libproxy.utdallas.edu/companyfinancials
JCP, Inc: Income Statement 2011-2015. Mergent Online. Web 15 April, 2015.
http://www.mergentonline.com.libproxy.utdallas.edu/companyfinancials.

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