J.C. Penney Moves to Turn Its Ailing Stores Around

After months of dismal sales, J.C. Penney Co. said Thursday that it hopes to improve its struggling department stores and catalog by focusing on a tried-and-true formula: emphasizing its strongest private-label brands, enhancing store environments, improving operations and expanding Internet sales.

Analysts, however, found that formula a bit too tried-and-true for a company that has posted month after month of declining same-store sales, or sales at stores open at least a year.

“It’s a standard, whenever a retailer is in trouble, that’s what they tell you--that they’re going to remodel stores and focus on key brands,” said Alan Mak of Argus Research in New York. “I think what Penney needs is something dramatic.”

Penney reported sales declines in seven of 12 months last year, including a drop of 7.6% in December.

The company, whose brightest light in 1998 was its well-performing Eckerd drugstore chain, suffered last year as shoppers chose either high-end department and specialty stores or low-end discounters.

Other mid-level department stores such as Sears, Roebuck & Co. have also been squeezed in the middle. But Penney, among the nation’s largest retailers, with 1,150 stores, has been hit especially hard.

Retail observers have said the company seems unclear about who its core customers are and how to appeal to them. And it has been saddled with many outmoded stores that shoppers have avoided.

In a meeting with institutional investors Thursday, Penney said it will focus on what it called its eight “power brands”--in-house labels such as Arizona Jeans, St. John’s Bay, Worthington, Stafford, Hunt Club and JCPenney Home Collection. The stores’ 34 private labels generate $8 billion in sales, the company said.

Those brands will be highlighted in in-store boutiques as part of an extensive remodeling.

Chief Executive James E. Oesterreicher said the stores will continue to offer national brands and exclusive third-party brands.

The company will also expand its Internet site to offer more of the 140,000 products in its catalog.

Mak, of Argus Research, said he would expect to see same-store sales improve in 1999 because sales were so slow last year.

“After you’ve done so poorly, it’s difficult to do worse than that,” Mak said. “If you are doing worse, you’re in serious trouble.”

Penney shares rose $1.69 on Thursday to close at $39.50 on the New York Stock Exchange.