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J.C. Penney aims to turn around slumping sales and red ink

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J.C. Penney Co. stumbled hard during the critical holiday season — reporting yet another quarter of tanking sales and net losses — and now is hustling hard to shake its dowdy patina.

After customer traffic missed expectations and its profit margin dipped because of more clearance sales, the company is looking ahead with a new marketing campaign, updated merchandise, a digital makeover and a renewed focus on sales of home goods.

“We began this year clean and ready to begin chasing the items that are selling,” Chief Executive Ron Johnson said after the company released its earnings report Wednesday. “This is the year the new JCP will take form.”

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Wall Street didn’t seem impressed. Penney’s stock rose 14 cents, or less than 1%, to $21.16 a share but fell about 15% in after-hours trading to nearly $18.

J.C. Penney is working to reinvent itself, offering mini-boutiques from the likes of Levi’s, MNG by Mango and Sephora in its stores. It’s trying to boost sales, offering free haircuts for children, updating its mannequins and signage and touting “Project Runway” judge Nina Garcia as a resident fashion curator.

The chain premiered commercials during the Academy Awards featuring new product lines from far fancier brands than are normally associated with the department store.

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Among them: a collection for juniors called L’Amour Nanette Lepore, from a designer often featured in upscale retailer Neiman Marcus. Pearl by Georgina Chapman of Marchesa, often spotted on the red carpet, includes attire for “holiday parties, black-tie events, summer soirees and prom.”

J.C. Penney will also start carrying the William Rast clothing line, co-founded by singer Justin Timberlake. And this fall, the chain said it’s pairing up with Cosmopolitan magazine to create an exclusive line of sexy products such as leopard-print panties and snakeskin-patterned clutches.

“J.C. Penney has done well to build out its celebrity and designer partnerships,” said Allison Ames, president of the North America division at brand licensing firm Beanstalk. “This has certainly been an effective strategy for retailers to demonstrate relevancy and drive consumers into their stores by attracting them with exclusive lines of apparel.”

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But the deluge of launches hardly equates to an inevitable turnaround for J.C. Penney, which has been mired in months of tumult.

On Wednesday, J.C. Penney Co. reported that it lost $552 million, or $2.51 a share, in its fiscal fourth quarter ended Feb. 2. That came after losing $87 million, or 41 cents a share, during the same period a year earlier.

Revenue plunged 28.4% to $3.9 billion. Sales declines have deepened throughout the year, tanking 20.1% in the first quarter, 22.6% in the second and 26.6% in the third.

Same-store sales in the fourth quarter, which track revenue at locations open at least a year and are less volatile than other measures, plummeted 31.7%. Online sales sank 34.4%.

Holiday season marketing efforts and pricing changes left customers cold. Competitors such as Wal-Mart Stores Inc. and Target Corp. poached market share.

By comparison, competitor Macy’s Inc. this week said its Internet sales soared 47.7% during its fourth quarter.

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In addition, the 110-year-old company is embroiled in a court battle with Macy’s over domestic diva Martha Stewart. Macy’s had an exclusive contract to sell goods with the doyenne of home goods. Now the department store is accusing Stewart of violating the agreement by signing a contract with J.C. Penney.

Analysts said shoppers are fed up with J.C. Penney’s flip-flopping pricing strategy, which slashed or eliminated many routine discounts and coupons only to bring them back to appease outraged customers.

Employee morale is sinking amid hundreds of layoffs. The company, with 1,100 locations, has seen its stock price halved in the last year.

J.C. Penney holds 9% of the $198-billion department store business in the U.S., outpaced by Sears Holdings Corp., Macy’s and Target. Wal-Mart dominates the market with a 27% share.

“We also made some big mistakes,” Johnson said of J.C. Penney’s year. “I take personal responsibility for this. Experience is making mistakes and learning from them, and I have learned a lot.”

tiffany.hsu@latimes.com

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