JC Penney interim CEO sees inexperienced shoots as retailer plots turnaround

Only a few months into serving as interim CEO of J.C. Penney, Stanley Shashoua stated he sees indicators of progress within the enterprise.

“J.C. Penney is a superb American household vacation spot, and our energy is in our storied manufacturers and the companies we offer,” he stated in a telephone interview. “We’re seeing week-over-week enhancements within the enterprise, and we’re more and more optimistic as we work our manner by way of this.”

Particularly, he cited progress in residence items and athletic attire — two classes which have outperformed in the course of the Covid pandemic as People look to refresh their homes and restock their wardrobes with extra comfy clothes. Extra just lately, Shashoua stated, clients have been coming to Penney for Easter attire and different formal put on — one other signal that individuals are prepared to decorate up once more.

Shashoua, who is also chief funding officer of the most important U.S. mall proprietor — Simon Property Group — has been on the helm of Penney since Dec. 31. That is when former CEO Jill Soltau abruptly left, following the division retailer chain’s Chapter 11 chapter submitting seven months earlier.

Simon, together with the U.S. mall proprietor Brookfield, got here to the rescue late final 12 months, buying practically all of Penney’s belongings out of chapter for $1.75 billion in money and debt. That included taking management of roughly 670 shops, in contrast with the greater than 800 that Penney had when it filed. For now, the corporate stated, no further retailer closures are being deliberate.

In response to Shashoua, the seek for a everlasting CEO can also be ongoing and the prospects are plentiful.

“We’re taking our time,” he stated. “We have gotten plenty of curiosity from plenty of very high-quality, extremely certified individuals. And that is very encouraging. Individuals come to us and inform us they love Penney, they grew up with Penney, and so they’re emotionally invested in it and have actual factors of view in regards to the enterprise.”

J.C. Penney’s troubles did not crop up in a single day. The enterprise had been stumbling for years as a result of ascent of e-commerce and what many analysts say was a failure by administration to put money into upgrading shops and trendy merchandising. A heavy debt load and the pandemic are finally what pushed it over the sting.

After working by way of chapter proceedings, Shashoua stated the Texas-headquartered firm has emerged with a stronger steadiness sheet and higher liquidity, although he didn’t present figures. He stated the main focus has shifted to retaining money flowing into the coffers. It has scaled again contracts with distributors and has invested in launching extra non-public labels throughout attire and residential, he added.

“It is a very comparable method within the preliminary phases that we have taken with all the opposite firms that we have managed to show round,” he stated.

Simon has already helped to take a number of retailers out of chapter. These embody the mall-based retailers Aeropostale, Eternally 21, Brooks Brothers and Fortunate Model. The latter two filed for chapter in 2020.

Simon CEO David Simon has stated his firm “made a ton of cash” in its Aeropostale deal. He is additionally informed analysts, “We’re definitely nearly as good because the private-equity guys in the case of retail funding.”

In its bid to avoid wasting Penney with Brookfield, Simon noticed a possibility in Penney’s loyal and numerous buyer base. It additionally at one level had a Penney retailer in about 50% of its U.S. malls, based mostly on one analyst’s evaluation, which additionally doubtless spurred the owner’s curiosity in investing to keep away from additional retailer closures at its personal purchasing facilities.

Simon Property shares are up greater than 33% this 12 months. It has a market cap of $42.7 billion.

Simon’s retail offers usually contain collaboration with the worldwide model proprietor and licensing firm Genuine Manufacturers Group, who can also be now taking part in a job in reviving J.C. Penney.

Shashoua stated a few of ABG’s attire manufacturers, like Eternally 21 and Juicy Couture, are going to be added to Penney’s merchandise assortment in shops and on-line. “2021 is extra about rebuilding the corporate, and I feel 2022 you are going to see good progress,” he stated.

For Penney, classes of focus in coming months embody residence items, males’s merchandise in big-and-tall sizes, girls’s merchandise in inclusive measurement ranges, and child and youngsters gear, in keeping with Shashoua. He additionally needs to develop on-line commerce, which now represents about 20% of Penney’s gross sales.

To make certain, Penney’s path to worthwhile progress, profitable again clients, and gaining market share in key classes like attire and footwear will not come simply.

Customers have more and more steered away from suburban malls, and particularly in the course of the pandemic. Many have shifted their buying on-line to the good thing about e-commerce giants like Amazon and Walmart. Clothes gross sales even have been hampered in the course of the well being disaster, as People have been spending a lot much less time getting dressed as much as get out.

Spending by U.S. customers on clothes and footwear tumbled 48% 12 months over 12 months final April, when many retail shops that promote attire and equipment have been shut for the total month, in keeping with a monitoring by Coresight Analysis. Extra just lately, spending within the class has ticked again up, rising 0.8% in January, Coresight stated.

Final 12 months, together with Penney, division retailer operators Neiman Marcus, Stage Shops, Lord & Taylor and Century 21 filed for chapter.

Penney hopes to keep away from the destiny of the long-lasting division retailer chain Sears. Since submitting for chapter in 2018, Sears has slowly been whittling down its retailer footprint to turn out to be a fraction of its former self.

“We’re strengthening our retail fundamentals, with a concentrate on trendy retail, digital, and an enticing buyer expertise,” Shashoua stated. “Retail is evolving quicker than ever … and so our purpose is to execute swiftly.”