J.C. Penney hopes investment in makeover will lure new customers


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A $35 black-and-white dress in Cosmopolitan magazine recently enticed Karin Danella back into a J.C. Penney store for the first time in years.

The Wexford resident who works not far from the Mall at Robinson was heading toward a changing room at the Penney's store earlier this week with that dress and two others that she wanted to try on. "I might come back," said Ms. Danella.

Penney's really needs her to return. And bring a few friends.

The department store chain founded more than a century ago by retail pioneer James Cash Penney has been one of the big stories in the industry this year, as it struggles through the process of reinventing itself. Led by CEO Ron Johnson, who started Nov. 1, the reconstructive surgery has been both behind the scenes and in front of customers.

Internally, Penney's laid off hundreds of employees in its headquarters and at places like the Harmar customer call center that employed more than 300, in an attempt to make operations more efficient, even as it changed policies on commission and staffing in stores.

More obvious to shoppers, the retailer cut coupons and promotions, at the same time it changed its merchandise selection and brought in construction crews.

The early results have been harsh. Sales at stores open at least a year dropped almost 22 percent in the second quarter, compared to a year earlier. Online sales fell almost 33 percent. Traffic through its stores dropped 12 percent.

Penney's shares are now trading around $24, down from around $32 the day before Mr. Johnson started work.

The reinvention has a way to go, and more turmoil is expected.

Glimpses of what could be are starting to show up in places like the Robinson Penney's store, where last week store leaders from around the Pittsburgh metro area and further out to Johnstown and even Steubenville, Ohio, gathered to see the progress.

"We're trying to get to the company prototype," said Frank Merriam, store leader at Robinson.

Mr. Merriam, who has been with Penney's for decades and at the Robinson store since the mall opened in 2001, means that for both his store and himself personally. He has switched to jeans and a sports coat from the suits that long served as his work uniform. "We were told to sell all our suits," he said with a grin.

The corporate classics signaled an older style of doing business that Penney's management wants to shed.

In a mid-September presentation to analysts, Mr. Johnson quoted results of earlier focus groups. Among the things the citizenry said: "It's a store for kids and older people. It's a little bit traditional. It's old-fashioned. It's for old ladies. It's polyester. There's overstuffed racks. I remember it from my childhood. It's low-end, it's discount, it's outdated."

Ms. Danella, who generally is more likely to be found in an Express or H&M, nodded her head when some of those comments were run by her. "It wasn't so good before," she said.

In the end, hundreds of Penney's stores are supposed to become sort of mini-malls, with lots of small shops dedicated to a single line or brand as well as welcoming spaces where customers can stop for a coffee, a yogurt and a quick check of email on their smartphones.

Wi-Fi is now in place at the Robinson store, but the rest of the evolution is going to take longer.

At the moment, the store has 12 mini shops, including ones for brands such as Sephora cosmetics, Liz Claiborne clothing and the colorful new jcp line presented on bright white shelving that was installed in the last several weeks.

Perhaps the most evolved spot is found on the store's second floor where heavy wooden fixtures, neon signs and burnished concrete floors set off the centerpiece counters accessorized with barstools and iPads. If there's a resemblance to an Apple store, well, Mr. Johnson has that company on his resume.

At the Levi bar artfully strewn with folded jeans, trained Levi specialist Emily Wasel can suggest fits for customers and explain how the 501 jean differs from the 511.

She can check customers out on the mobile point-of-sale computer that she carries around her neck. The system only works for those with credit cards or gift cards -- no cash. Receipts can either be emailed to customers or sent to a cash register.

Already some checkout stations have been removed in the region's Penney's stores, leaving open vistas to the mall -- and sometimes confusing customers looking for a cash register.

Mr. Merriam sees mobile technology spreading across the store, allowing employees to avoid being trapped behind checkout stations but still able to help customers buy easily and quickly. "We've got other types of technology coming our way," he said.

He also expects another round of construction next year, probably starting after the holiday season. By the end of 2013, Penney's plans to have 40 total shops in stores like the one in Robinson and 100 by 2015.

In a short-term fix, the rest of the store has been reset. Mr. Merriam waves to the vista evident now down the wide, uncluttered aisles. No fixtures are now allowed closer than 18 inches from the path. The men's clothing department next to the Levi's shop has been decluttered and mannequins set up to offer visual outfit suggestions.

Even as the company works to add more shops -- Mr. Johnson's presentation ran through names such as Docker, Haggar and Disney, as well as Canadian apparel retailer Joe Fresh, coffee and tea purveyor Bodum, the baby line Giggle and candy store Sugar Shack -- the drop in shopper traffic may reflect some longtime customers' feeling that they've lost choices, along with the coupons.

Mr. Merriam pointed out names such as Arizona and Stafford that haven't gone away. "We've kept a lot of the brands that have successful for us," he said.

Elements of the reinvention aren't entirely new. Macy's once tried to back abruptly away from coupons and had to backtrack. Wal-Mart cleared its aisles only to have sales slip when customers missed the stacks of sale items. Apple led the way on things such as mobile checkout but retailers of all sorts are embracing the use of technology.

Penney's overhaul may be more ambitious because of its scale and speed. The company is working with 1,100 stores, although not all are being remodeled, even as systems built over decades are being restructured quickly.

Although some analysts have said they believe the vision could pay off, the difficulty in getting to that point has been evident even beyond the falling share price. As of Wednesday, Mr. Johnson's CEO approval rating had dropped to 44 percent on Sausalito, Calif.-based job site Glassdoor.com, based on ratings from 249 employees, down from 66 percent in April, based on ratings from 90 employees.

One employee from Monaca posted on the site this summer that cuts to workers' hours and departments closing had people worrying about their jobs. Another from Plano, Texas, suggested senior management move as fast as possible to implement their changes: "Figure out where you are going and get there fast. Customers are leaving in droves."

Carol Sisley, of Bridgeville, was at a checkout in the Robinson store this week with a stack of clothes, including three tops on sale for $7 each. Asked if she liked the changes that Penney's has made, she stopped and thought about it.

"Yes and no," she decided.

Ms. Sisley, who once worked for the chain, said the company's system of marking down items on set days each month can be a hassle. "I can't always get here on the certain Friday." Yet she said she appreciates the lower prices.

Penney's management has figured out ways to get people back through the doors again, using a traditional four-letter word. An offer for "free" kids haircuts drew crowds in August. The retailer plans to bring the offer back again each Sunday beginning in November.

businessnews

Teresa F. Lindeman: tlindeman@post-gazette.com or at 412-263-2018.


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