If JCPenney Wants A Model For Its Retail Turnaround, It Has One: Macy's

If the new management at JCPenney (NYSE:JCP) wants some clues as to how to do a turnaround in this space, they would be well-served to take a hard look at just about everything that Macy's (NYSE:M) has been doing, reports Bloomberg.

"At the heart of Ron Johnson's plan to turn J.C. Penney Co. into a mini mall of boutiques was the notion that the department-store model needed reinvention. Yet while J.C. Penney faced challenges on Johnson's arrival—not least that its middle-income customers had been hit hard by the economic downturn—other department stores have been thriving without a radical course correction," the story said. "Exhibit A: Macy's, which has turned in 12 consecutive quarters of sales growth and managed to remain relevant in an age when many brick- and-mortar retailers have lost ground to the Web."

The story pointed to CEO Terry Lundgren and how he has empowered store managers to create their own merchandise assortments, along with a focused effort to bring in younger shoppers (teens, early 20s) through adding 13 specialized brands. The goal was to pull those shoppers in from mall specialty apparel stores, a move that seemed to work well.

One critical story is that when a retailer shows strong success, observers tend to conveniently forget the dark days. Macy's board gave Lundgren the time to make the turnaround work. That turnaround took years and the board watched as revenue plunged for three consecutive years before rebounding in 2011, and per-share profit had a similar sustained negative stretch, starting in 2007.

Indeed, JCPenney indirectly helped Macy's because it made the Macy's discounts look even more attractive. By doing so, Macy's directly picked up marketshare away from JCPenney.

"Not to take anything away from what Macy's has achieved, but for the last 15 months they also have been benefiting from Penny's problems," said Brian Yarbrough, an analyst with Edward Jones & Co. in St. Louis.

Whatever decisions come in the next few months, it may be that JCPenney is too damaged to salvage and should be sold, said George Bradt, managing director at PrimeGenesis, a Stamford, Conn., consulting firm. "Penney was the place where middle American women went to buy underwear, but now they have lots of other places to go," Bradt said. "Macy's has been able to survive in the middle and do well because they have a real brand and they're edging upscale, but Penney has lost its reason to exist."

For more:  

-See the Bloomberg story

Related stories:

JCPenney's Johnson Is Out, Ullman Is Back. Now What?
Macy's Stops Reporting Online Stats, Blames Too Much Channel Blur
Macy's Re-Commits To Merged Channel In An Important Way

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