Down, But Not Out: JC Penney CEO Meets Shareholders
The morning after the embattled retailer reported another quarterly loss, J.C. Penney CEO Mike Ullman told shareholders: "I have an enduring affection for J.C. Penney, its customers, associates and shareholders...it's a privilege to come back and get us on a profitable growth track."
Without a formal presentation or powerpoint slides, Ullman outlined his priorities for shareholders who gathered inside the company's home office in Plano, Texas, in a large room just to the left of a giant statue of company founder James Cash Penney. For all the controversy surrounding the department store's transformation, the shareholder attendance was sparse, and the meeting was short, lasting only 55 minutes from start to finish.
Ullman's message mirrored the words he spoke on the earnings call less than 24 hours prior. Messaging, marketing, "attractions" in stores, fixing ecommerce, and reaching out to suppliers as the team looks to re-establish some of its more popular private-label brands. Although Ullman didn't name names for those store brands, St. John's Bay, an important billion dollar store brand, is already 50 percent re-established in stores.
The "attractions," Ullman referred to are the shops within J.C. Penney's stores, which had been the cornerstone of former CEO Ron Johnson's plan to overhaul the struggling retailer.
(Read More: Pro Slams JCPenney, Calls Margins 'Horrible')
While Johnson was focused on improving the technology within the brick-and-mortar stores as he worked to attract a younger consumer, Johnson did not detail much about the retailer's ecommerce business. In fact, in 2012 online sales fell 33 percent, more than the 25-percent decrease in same-store sales.
Ullman, however, told shareholders, J.C. Penney would have positive online sales this year. "We lost a lot of business here by our stores not being able to fill orders...there's opportunity here," he said.
The "apology" and "thank you" commercials were shown to the group, and Ullman said, although the apology ad ran only for a few days, 25 percent of the population saw it.
On the first-quarter earnings call yesterday, analysts asked questions, trying to get a sense of if—and by how much—sales and traffic improved as a result. But Ullman was tight-lipped, saying he was "encouraged by shopper reaction," though first-quarter traffic was down 6 percent and same-store sales fell 16.6 percent.
However, he told shareholders that consumer surveys revealed a "double-digit increase" in the percent of respondents that were willing to reconsider shopping at J.C. Penney, as well as a double-digit gain when those surveyed were asked if J.C. Penney's best days are still ahead.
All 11 board members were re-elected, including hedge fund activist investor Bill Ackman. Ackman has a 39 percent stake in the company, and was largely responsible for recruiting Johnson to J.C. Penney to replace Ullman in 2011.
Seated at the front of the crowd from left to right were J.C. Penney Secretary Janet Dhillon, Chariman of the Board Thomas Engibous, Ullman, and CFO Ken Hannah.
The retailer has returned to a more traditional high/low pricing strategy, to compete with its rivals using sales and coupons. In 2011, the retailer offered 590 promotions. This time around, promotions will focus around 20 key shopping periods, Ullman said.
Particular events Ullman pointed to in the coming months include the June 6 home launch, Father's Day, and the key seven- week back-to-school event.
Ullman spoke to all the associates recently and said the response was positive and that everyone just wants to get back on track.
Shareholders too want to get back on track, and recoup losses. J.C. Penney shares have lost more than 54 percent since day one of the transformation. However, since Ullman rejoined J.C. Penney as CEO, shares have gained 23 percent in a month, and today shareholders seemed willing to be patient. Ullman himself indicated the company has work to do to rebuild trust with consumers.
Only four shareholders came forward to ask questions, and each welcomed back Mike Ullman. There were no protests, no outrage, just praise for the near-term priorities Ullman laid out.
One question asked about the plan for quality assurance, particularly in the wake of the Bangladesh tragedy. (Joe Fresh, a vendor to J.C. Penney, had manufacturing activity in the Rana Plaza building that collapsed three weeks ago.)
The company said it has had a long relationship with manufacturers in Bangladesh and has a compliance director working in the country since 2010. In the wake of the tragedy, the company plans to require more inspections, including those that focus on engineering, structural and electrical issues.
Ullman concluded the meeting much the way he started: "I'm enthusiastic to be here. I've motivated to get back on track and make shareholders proud."
-By CNBC's Courtney Reagan. Follow her on Twitter @CourtReagan
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