JCPenney is trying.
A new partnership with rising resale site ThredUp, announced today, two dozen or so store closings and a series of executive changes since the start of the year are all proof of the beleaguered retailer’s efforts to orchestrate a turnaround for its business. But, is it enough?
That remains to be seen.
During the second quarter, also announced today, the Plano, Texas-based company’s revenues declined more than expected, dipping 7.4% to $2.62 billion. (Analysts had forecast revenues of $2.69 billion.) However, it managed to reduce its losses from $101 million the previous year to $48 million, or 15 cents per share. That figure was better than Wall Street’s predicted loss of 31 cents a share.
Investors appeared to rejoice in the glimmer of hope offered in those results — lifting JCPenney’s shares as much as 16% in premarket trading, although they remain priced near a paltry 58 cents per share and remain at risk for delisting by the New York Stock Exchange. In late July, the company also joined Fitch Ratings’ “loans of concern” list, ranking as a high risk of defaulting on a $1.57 billion loan balance. (Filings with the U.S. Securities and Exchange Commission put its debt at roughly $4 billion.)
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“We have every intention of increasing our share price to above $1 through the improvements in our operating performance or, if necessary, via other remedies available to us,” CEO Jill Soltau told investors during a conference call today.
So far, since taking the helm of the department store last October, Soltau has made a marked push toward achieving a JCPenney’s rebound, nixing a few dozen underperforming stores and hiring new talent at the start of the year, including former McKinsey & Co. executive Truett Horne as chief transformation officer.
Soltau noted today that she is “energized” by the senior leaders she’s added “[who] are working tirelessly to restore health back into our business” — and also pointed to last month’s hiring of Jim DePaul as EVP of stores as well as the recent addition of Stacey Shively as SVP and GMM of home.
“We are laser focused on two parallel paths,” Soltau added. “One is building a framework to reestablish the practices needed to strengthen the day-to-day operations of our business. Concurrently, we are developing differentiating, transformational initiatives. We are working with speed, urgency and a relentless focus aimed to reconnect with our customers on their terms, with a deep understanding of how they live, shop and interact with JCPenney.”
She noted, “We are not simply running a business. We are rebuilding a business.”
To that end, Soltau said the firm has worked to reduce and enhance its inventory position, bringing its levels down 12.5% in Q2 and leading to lower permanent markdowns in stores.
Still, amid digital gains at competitors like Kohl’s and Macy’s, JCPenney also finds itself working to restore its e-commerce sales to growth. That goal — as well as a brick-and-mortar improvement plan — could be aided by its new partnership with ThredUp, which brands itself as the world’s largest online consignment store. JCPenney joins competitor Macy’s, which also announced a partnership with ThredUp this week at a time when the resale market, boosted by sustainable-minded and budget conscious millennials and Generation Z, continues to gain steam.
What’s more, Soltau said the company has, since Q1, removed unproductive and unprofitable factory-shipped SKUs from its website and is reaping the benefits, which include improved online gross profit in Q2.
“We are improving navigation and presentation while curating the assortment to provide an easier shopping experience across all platforms, desktop, mobile and our app,” she added. “This has resulted in improved conversion and customer service scores year-over-year.”
On the physical store side, she said, JCPenney has tested a new centralized pickup and returns area that “improves not only the in-store experience but is also a step towards a better omnichannel customer experience.”
Still, marred by rumors of an impending bankruptcy, JCPenney remains a concern for market watchers, at least one of whom has said she is seeing little interest in the company by investors overall.
“The biggest hurdle is their reputation — that’s No. 1,” Jane Hali, CEO of Jane Hali & Associates, told FN in May. “You’re talking about at least 12 to 15 years of problems. The consumer lost confidence. I stopped covering them as a stock because my clients have lost faith in them. [What’s more], the customer lost faith in JCPenney before the Street did.”
At market close, JCPenney shares were up 2.2% to 58 cents.