CEO Marc Rosen on the Playbook for Transforming JCPenney
At JCPenney, the balance sheet has been cleaned up, the management team rebuilt and the store fleet rationalized.
And there’s new ownership that’s beginning to invest substantially in several areas of business and is aligned with management on priorities.
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That’s all according to Marc Rosen, chief executive officer of JCPenney, who in a wide-ranging interview spelled out how the retailer is advancing its “transformation” from a company that not long ago was on the verge of liquidation to one that’s been stabilized financially, striving to regain market share and even reclaim the status it once held as a leading national retailer.
The Plano, Texas-based Penney’s survived a catastrophic attempt at modernization a decade ago and was lifted out of bankruptcy in December 2020 by the Simon Property Group and Brookfield Asset Management, which acquired the company’s retail and operating assets, wiping out much debt. About one-third of Penney’s fleet of 667 stores are in Simon and Brookfield malls. Penney’s revenue in 2019 was $11.2 billion, down from $20 billion to $21 billion in the mid-1990s, when there were about 1,300 stores.
“The good thing is when I came to Penney’s a lot of things had been done to get the balance sheet, the liquidity and things like that in a good place. So I had the opportunity to really look at what we needed to do from a customer perspective,” said Rosen, who joined Penney’s in November 2021.
The former Levi’s Strauss & Co. and Walmart Inc. senior executive said much of his time since joining Penney’s was spent filling key executive slots. “About half of the roles in the C-suite we had to fill. That made for an intensive 10 months. I’m really proud of the team we have assembled. We not only have a much more diverse team that mirrors our customer base, we also have a very talented leadership team that’s ready to take on the next stage of transformation for JCPenney.”
Among the strategies Rosen outlined to WWD:
Rolling out new beauty departments with a mix of mass, prestige and emerging founder-led brands.
Intensifying marketing around inclusivity and serving America’s diverse working-class families.
Enhancing the digital experience and growing e-commerce sales.
Strengthening omni capabilities and increasing inventory visibility.
Creating a hybrid work culture, enabling in-office or remote working, depending on the task.
“You are going to see us lean in heavily and make investments in the areas that matter and that is really digital, supply chain and technology. There is a significant amount of investment we have to make to build that digital experience for the customer,” Rosen said, adding that management and ownership are “aligned” on making it happen.
About 25 percent of Penney’s total volume is generated online. “That is significant, but also given the customer environment, given what’s happening overall with the growth of online, we believe we have significant room to grow the online business and in collaboration with that, grow our store business given where we are right now.
“The reason I came here is because Penney’s is absolutely an iconic American brand and I believe in the mission we have created, which is to celebrate and serve America’s diverse working families. Throughout my career I’ve spent a lot of time serving and celebrating with those families. I believe they deserve a retail experience where they don’t have to make the trade-offs between style and value and experience and that’s what we can offer…we believe we are uniquely positioned with the products and the brands that we have, whether that’s Worthington [the long-standing private brand for women’s for the office and the after hours] or Mutual Weave [the men’s denim lifestyle private brand launched last February].”
Right before and during the last Labor Day weekend, Penney’s staged a “We Got Your Cart” event, where the company randomly selected a few families shopping its stores and gave them $500 gift cards. “We shared that throughout social media and you will see us continue to build on that [message] and our connection with America’s diverse working families throughout the holiday season. It is the core and the essence of who we are, and Labor Day is the quintessential holiday when you are talking about diverse working American families.” Penney’s will be randomly giving out a greater number of $500 gift cards in the holiday season.
One of Rosen’s first hires was Katie Mullen as chief digital and transformation officer, a dual role that isn’t typical in retailing though necessary for Penney’s. “A big part of our transformation is actually developing an online and digital shopping experience, which is integrated with our stores.”
Also named was a new chief information officer, Sharmeelee “Sharms” Bala, who previously worked with Rosen at Walmart as well as Gap Inc.; John Aylward became chief marketing officer, and just last month, Stephanie Plaines became chief financial officer. Others including Michelle Wlazlo, executive vice president and chief merchandising officer, as well as executives leading store operations, human resources and the general counsel, were already on board, and a chief supply chain officer was picked through an internal promotion.
“At the leadership level, we are now complete,” said Rosen. “The team is in place. It’s a big relief.”
During the summer, Penney’s signed a lease for office space at the former Plano, Texas headquarters building which the company previously sold. Staffers will be moving in early next year. “Our intent with that new office space and how we go forward working is largely a hybrid environment with some remote, too. So what we say is ‘the where follows the work.’ In other words, if you are a merchant and you are doing line reviews and you need to physically see product and have samples and see colors and touch and feel, that requires being in person. You are going to be in the office. If you are a merchant and working on a financial plan, you may be more productive staying at home that day to have some quiet time to go through that. A good part of our digital and technological positions are remote, too.
“A big part of our transformation is actually going through that cultural change to figure out how we work different and better cross functionally, how we make decisions faster. Sometimes people say that could be a challenge when you are working remotely. I think it kind of puts everything on an equal playing field. A big part of the transformation that we are going through is about speed and customer focus.”
Penney’s doesn’t divulge a capital expenditure budget. “What I can say is we have ownership that is aligned with the investments that we want to make, and understands the return that it’s going to drive for the business,” Rosen said. “The beauty is we have the advantage of being private and being really able to focus on the long term.”
Penney’s is starting to upgrade stores. “We are rolling out a store refresh program to a group of stores this year to test what matters in giving the customers a great experience, replacing lighting, carpeting, modernizing. Basically, we will be learning from what works to set a plan going forward to how we really refresh the store fleet.”
Regarding the store count, it’s down to 667 stores, about half what it was a few years ago.
“We feel that is in general a good number. There has been a lot of work done to clean up the store portfolio and get us to a place where we have the right stores delivering what they need to in terms of profitability and sales.”
He raised the possibility of a few store openings, indicating: “There are some markets right now where we may not have a store and if you looked at the demographics you would say it would be appropriate to. So you may see some adds coming there. In markets where we may have a store in a location that’s not ideal, you could see some relocations. But net I think that number is about right for the business. Stores are really critical and they work together with online to drive sales and sales growth. A store in a marketplace serves as a billboard, it serves as a place where customers can come in and try on, it serves as a place where they can do returns. We have a lot of experiences in our stores that are unique to JCPenney, like the salon, like beauty, like the photo studio, like optical.” About one-third of Penney’s stores are either in a Simon or Brookfield mall.
As for buy online, pick up in store, curbside pickup, and shipping from stores, “We do all of those. We have launched those capabilities but we have the opportunity to go even further to use them to their full potential.
“We are working on improving our inventory visibility because that will make the buy online, pick up in store experience better for customers because we can make more inventory available. There is a lot coming up on inventory visibility and things like that. It’s inventory visibility, convenience and experience that we are focused on.”
On the beauty front, Penney’s new format will roll out to more than 600 doors by spring of next year, at a rate of roughly 75 a month beginning in October. A pilot group was launched at 10 doors in October 2021.
“It’s a hyper-inclusive, all-in-one beauty experience,” said Rosen. “Beauty is also a balance of some of those mass brands, and it’s a balance of prestige brands and a balance of founder-led brands that are new and emerging.” The beauty shops are situated near the front of the store, for the most part, and adjacent to women’s apparel. On average, the shops are 2,000 to 3,600 square feet, depending on location.
Penney’s had a long run with Sephora until it pulled out and moved into Kohl’s, but from that partnership 3,000 beauty consultants remain. “They know the customer, what she buys, understands color and product that she needs. Having that workforce of trained beauty experts is an advantage.
“The other unique thing is in over 600 of our stores we have salons and over 5,000 stylists in our salons. There’s a big linkage in the salon and the beauty experience, and the customer expects that linkage.” The salons do display hair treatment products and provide trial and sampling. “One of the people you trust most in your life is your hairstylist, and having that stylist in the salon being a beauty adviser is a huge advantage.
“We recognize that our customer is diverse, about a third” are Black, Indigenous or people of color, Rosen said, noting that in beauty, sometimes they splurge on prestige products, and sometimes buy mass products to save money. “We are offering both and products that serve a diverse consumer. As part of the beauty rollout we are going to amplify our partnership with Thirteen Lune, which brings more than 65 BIPOC or female-founded brands into the store and helps us celebrate and serve America’s diverse working families. Another part of our purpose is to help those diverse founder brands grow and scale” the Penney’s national footprint. “Thirteen Lune is a great incubator for those diverse brands.”
Inclusivity, Rosen added, is “absolutely a priority. It’s about who our associates in the store are. It’s about who our suppliers are, and who our customers are. At the end of the day we know it’s really important for all of our customers to feel seen and have product that is not only approachable but applies to their body and their skin color, and lets them celebrate who they are.
“You will see more marketing that shares that inclusivity. It is a key part of who we are and telling our story. But it’s not just in beauty. It goes throughout the store,” whether it’s with inclusive sizing, with big and tall, plus sizes and petites, or adaptive clothing for people with special needs. “We are really focused on bringing that unique, hyper-inclusive experience to our customers around the country.”
Penney’s business is about a 50-50 split between private and national brands. “We believe that is about the right mix,” Rosen said. “We continue to look at the portfolio and how we fill that out and the goal is not to have more for a number, the goal is to serve our customer and to build out the assortment in that good, better, best tiering.”
Authentic Brands Group, the brand development, marketing and entertainment company, is a strategic partner in Penney’s and has been a big factor in feeding it merchandise, such as the Juicy Couture and Forever 21 labels, as well as just last week, Frye & Co. for Western-style footwear and apparel. Penney’s has a track record of developing some enduring private brands, notably Arizona, Stafford, a.n.a, Worthington and St. John’s Bay.
Rosen said Levi’s, where he previously worked, at Penney’s “has an elevated presentation and a prime location within our store. It is one of our key national brands. I don’t anticipate changes there. My experience at Levi’s taught me the importance of the way we present the brand to the customer and the experience they have with the brand.”
Asked how business has fared this fall, Rosen replied: “The consumer is still absolutely looking for newness. Our new fall product in the stores is selling well when the customer finds new products relevant to them. Buy-now-wear-now product is selling very, very well in our stores. We are seeing good traction around outerwear, which just launched in our store.”
The Worthington women’s private brand rolled out a new line of sportswear which Rosen said is selling in part because of the population’s post-pandemic return to the office. Similarly in men’s, dress-up and suiting are selling, he added.
“Mutual Weave has been a very strong launch for us. And we are seeing significant growth in our home business overall. We believe we are gaining share in that.” And at the recently launched Frye & Co. “early signs are positive.”
For holiday 2022, “A big part of what you’ll see us do is talk about real American families. We will show America’s diverse working families how they can both celebrate the holiday and save during the holiday, and not have to make a trade-off between the two.
The retail industry overall will be “more promotionally intense,” Rosen said. “We will continue to deliver great deals throughout the season. We will be starting early and customers are going to be out there looking for that value early. Over the past couple of years you have seen the season move earlier and earlier.” As far as when Penney’s kicks off its holiday campaign, it will be earlier, but Rosen declined to specify the timing.
While it’s been an intense first year on the job, “I continue to learn every single day. The good news is I have the advantage of coming from a deep retail experience and broad managerial experience,” Rosen said.
The 26-year industry veteran at Walmart and Levi’s worked across all areas of the businesses, including technology, operations, strategy, stores and e-commerce. He was executive vice president and president of Levi Strauss Americas, leading commercial operations for Levi’s, Dockers, Signature by Levi Strauss & Co. and Denizen brands across all channels. Earlier at Levi’s, Rosen led the company’s global e-commerce and retail businesses, including 3,000 stores. Prior to Levi’s, Rosen spent 14 years at Walmart in a variety of senior leadership functions, ultimately serving as senior vice president of global e-commerce. He began his career at Ernst & Young, providing strategic retail advisory services.
“I tell people all the time that I started my career when I was 6 years old because my grandfather owned two small general merchandise stores, Chozen’s, in small towns in Minnesota and Iowa. When you own your own store you work seven days a week,” said Rosen, a native of Minneapolis. “I would go with my grandfather on Sunday mornings when the store was closed so I say I started my career in replenishment, transferring merchandise from the store that had the warehouse to the other store that needed inventory.” Chozen’s went out of business 40 years ago.
“I love retail. It’s a consumer business and I love serving consumers. I love things we all see, feel, touch and understand. The beauty of retail is you have a real, live lab where you can test and learn with the customer and you get feedback every day.
“Given the fact that our business is big and we sell more items, there is complexity, and as stores and consumers become more diverse, understanding data and integrating data into our business becomes more and more important,” said Rosen. “Technology, whether it be for e-commerce or use of data and analytics to run the business, is the core source of competitive advantage. It’s going to differentiate retailers going forward. I know that’s a big part of why I am here in this role from my perspective, and from the ownership’s perspective. It’s because I spent a big part of my career running technology at Walmart, running e-commerce there and at Levi’s, leading the digital transformation and the move to using A.I. and data analytics and machine learning.
“I think that’s a really important part of what we have to do at Penney’s going forward.”
The Beauty Rollout
Beginning in October, Penney’s beauty presentation, called JCPenney Beauty, will expand from the 10 brick-and-mortar pilot locations launched in fall 2021, to 600 stores by spring 2023.
The expansion builds on the partnership with Thirteen Lune featuring beauty brands from Black, Indigenous or people of color founders for a diverse customer and comprising roughly a quarter of Penney’s beauty assortment. JCPenney Beauty is already online.
Wlazlo said: “By creating a fully ownable beauty experience, JCPenney can quickly adapt and respond to our customers’ wants and needs. Last year’s preview launch allowed us to learn from our customers and evolve the JCPenney Beauty experience as it expands nationwide and online, making it unlike any other beauty retail experience.”
The strategy includes a virtual makeup try-on and skin care quiz to help customers find products for their needs and is integrated with Penney’s rewards program and its beauty salons, which together offer more than 250 beauty brands across makeup, skin care, fragrance, hair care, salon services, wellness and styling products. It’s a mix of value to prestige products. Among Penney’s exclusives are Relevant: Your Skin Seen by Nyakio Grieco, Reina Rebelde, Mirabella and Shades by Shan (launching 2023). Thirteen Lune’s assortment at Penney’s has doubled since last fall, increasing to about 65 brands including EleVen by Venus Williams, MinttyMakeup, NCLA Beauty and Vamigas.
“Thirteen Lune’s partnership with JCPenney Beauty is rooted in our companies’ shared mission to ensure hyper-inclusive beauty is represented in the industry and easily accessible to people, no matter where they live,” said Grieco, cofounder of Thirteen Lune and founder of Relevant: Your Skin Seen.
Stores not yet featuring the full experience will be given a preview of Penney’s top products in time for holiday.
Penney’s works with Landing International, a technology platform serving indie and minority-owned beauty brands. Through this partnership Penney’s onboards indie and K-Beauty brands such as CosRx, Hanskin, I Dew Care and Neogen. Also, Penney’s is partnering with nonprofit organization HairtoStay to generate awareness and help fund hair-preserving, scalp-cooling treatments for low-income cancer patients going through chemotherapy. For Breast Cancer Awareness Month, Penney’s will make a $50,000 direct donation and provide education and fundraising initiatives for customers, associates and its salon stylists.
