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CNBC Exclusive: CNBC Transcript: J.C. Penney CEO Marvin Ellison Speaks with CNBC’s Courtney Reagan on “Power Lunch” Today

WHEN: Today, Monday, February 29th

WHERE: CNBC's "Power Lunch"

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with new J.C. Penney CEO Marvin Ellison on CNBC's "Power Lunch" (M-F, 1PM-3PM ET) today, Monday, February 29th.

All references must be sourced to CNBC.

REAGAN: THIS IS IN FACT MARVIN ELLISON'S VERY FIRST TV INTERVIEW. THANK YOU VERY MUCH FOR JOINING US TODAY, MARVIN. YOU HAD A NICE QUARTER. MICHELLE JUST MENTIONED HOW NICELY THE STOCK PERFORMED SINCE YOU RELEASED RESULTS. YOU HAVE COME A LONG WAY FROM BANKRUPTCY. HOWEVER, STILL FAR FROM THE PEAK SALES OF $20 BILLION IN 2006. DO YOU THINK JCPENNEY CAN RETURN TO THAT LEVEL AGAIN?

ELLISON: IT IS NOT THE FOCUS. THE FOCUS IS GREAT SHAREHOLDER VALUE AND SHAREHOLDER RETURN. WE WANT TO RUN A PROFITABLE COMPANY THAT GROWS SALES AND GROWS SALES IN A PROFITABLE WAY. IF WE CAN GET BACK TO THAT, THAT WOULD BE FABULOUS. THAT'S NOT THE INTENT. THE INTENT IS TO GROW SALES, GROW PROFITS AND HAVE A GREAT RETURN FOR SHAREHOLDERS.

REAGAN: HOW WILL YOU GROW THOSE SALES? YOU'RE IN AN ENVIRONMENT THAT IS CHANGING RAPIDLY. SHOPPERS ARE COMING TO THE MALL LESS FREQUENTLY. IN FACT MANY OF THEM ARE BUYING LESS APPAREL. WHAT DOES THAT MEAN FOR JCPENNEY IN THE LONG RUN?

ELLISON: WE HAVE A COUPLE OF THINGS WE'RE EXCITED ABOUT. WE'RE GOING TO OPEN APPROXIMATELY 60 MORE SEPHORA LOCATIONS INSIDE JCPENNEY THIS YEAR. WE'RE GOING TO REDESIGN THE CENTER COURT AREA OF A THIRD OF OUR STORES, THAT'S THE FASHION, JEWELRY, SUNGLASSES, ACCESSORIES, VERY HIGH MARGIN, VERY HIGH TRAFFIC AREA SO ONE THIRD OF OUR STORES WILL GET THAT UPGRADE. WE'RE GOING TO ROLL OUT BUY ONLINE PICK UP IN STORE SAME DAY IN EVERY STORE BY BACK TO SCHOOL. ONE OF FEW RETAILERS IN AMERICA THAT CAN'T DO THAT TODAY. THE UPSIDE POTENTIAL IS ENORMOUS. WE'RE GOING TO HAVE A LOT OF OTHER INITIATIVES THAT WILL CONTINUE TO DRIVE GREAT SALES, BUT THESE THREE THINGS ARE INCREMENTAL TO WHAT WE DID IN 2015.

REAGAN: THAT'S A GOOD POINT. JCPENNEY ISN'T CURRENTLY DOING BUY ONLINE AND PICK UP IN STORE AS OTHER RETAILERS ARE. YOU ADMITTED YOU'RE BEHIND IN A NUMBER OF OTHER AREAS. IS IT POSSIBLE THAT JCPENNEY CAN ACTUALLY CATCH UP AT THIS POINT?

ELLISON: ABSOLUTELY. IT IS REALLY ABOUT TALENT. WE WENT OUT AND WE RECRUITED ONE OF THE BEST E-COMMERCE EXECUTIVES IN RETAIL. WE RECRUITED A GREAT SUPPLY CHAIN EXECUTIVE, NAMED A NEW CHIEF INFORMATION OFFICER. WE HAVE A NEW MARKETING LEADER. AND SO WE'RE TAKING THE TALENT IN THE MARKETPLACE, BRINGING THEM IN, ALLOWING THEM TO IMPLEMENT THINGS THAT THEY HAVE DONE IN THE PAST, TO BRING US BACK TO REALLY A WORLD CLASS RETAILER. IT IS REALLY ABOUT HAVING VERY SPECIFIC PLANS, GREAT TALENT, AND EXECUTION AND THE FUNDAMENTALS THAT MOST RETAILS TAKE FOR GRANTED, WE'RE JUST BRINGING THOSE THINGS BACK. AND BY THE WAY, WE DELIVERED A 4.5% COMP IN 2015 WHILE CATCHING UP. SO I'M EXCITED ABOUT WHAT HAPPENS WHEN WE CATCH UP.

REAGAN: YOU BROUGHT UP AN INTERESTING POINTT. YOU BROUGHT IN MANY NEW LEADERS. YOU YOURSELF ARE A RELATIVELY NEW LEADER, SEVEN MONTHS IN. THE COMPANY HAS GONE THROUGH THREE CEOs IN FOUR PLUS YEARS. WHAT IS MORALE LIKE? HOW ARE EMPLOYEES RESPONDING TO THE CONSTANTLY SHIFTING STRATEGY?

ELLISON: ONE OF THE KEY THINGS I MADE ON THE EARNINGS CALL, POINTS I MADE, IS THAT THE REASON WHY WE WERE SO SUCCESSFUL IN THE FOURTH QUARTER IS BECAUSE OF THE BUY-IN OF THE TEAM TO THE STRATEGY. WE HAVE A VERY TENURED FRONT LINE TEAM, GENERAL MANAGERS IN THE STORES, DISTRICT MANAGERS AND MERCHANTS AND THOSE INDIVIDUALS REALLY BOUGHT INTO OUR STRATEGY, WE'RE TRYING TO DO THREE THINGS. WE'RE GOING TO HAVE A GREAT OMNI CHALLENGE ENVIRONMENT MARRYING DIGITAL AND BRICK AND MORTAR, WE'RE GOING TO INCREASE OUR PRIVATE BRAND PENETRATION, THAT INCREASES PROFITABILITY IN DIFFERENTIATION AND GROW REVENUE PER CUSTOMER. EVERY TIME A CUSTOMER COMES IN, WE GIVE HER MORE OPPORTUNITIES TO BUY FROM US. AND THAT STRATEGY HAS BEEN TOTALLY BOUGHT IN BY THE EXISTING TEAM AND MORALE HAS BEEN VERY STRONG.

REAGAN: THAT'S KEY. BECAUSE TRAFFIC, I UNDERSTAND, IS DOWN, BUT CONVERSION IS UP. YOU NEED TO BOTH INCREASE THE TOTAL NUMBER OF TRANSACTIONS OR THE TRANSACTION SIZE ITSELF.

ELLISON: MALL TRAFFIC IS DOWN. OUR CONVERSION AND OUR POINT OF SALE TRANSACTIONS ARE UP. SO WE'RE BECOMING A DESTINATION IN THE MALLS WE'RE IN. ALTHOUGH TRAFFIC IS DOWN, OUR TRAFFIC IS UP RELATIVE TO THE MALL AND OUR POINT OF SALE CONVERSION, WHICH IS THE MOST IMPORTANT MEASUREMENT IS ACTUALLY UP VERSUS LAST YEAR.

REAGAN: AND WHEN YOU LOOK AT YOUR DEBT LOAD, JCPENNEY AND YOU AND YOUR MANAGEMENT TEAM HAVE BEEN CAREFUL ABOUT TRYING TO REDUCE YOUR DEBT LOAD. ARE YOU GOING TO BE ABLE TO REWARD SHAREHOLDERS AT ANYTIME WITH THE STOCK BUYBACK IN THE NEAR FUTURE?

ELLISON: THAT'S A WAY OFF IN THE FUTURE TO BE QUITE HONEST WITH YOU. BUT LET'S TALK ABOUT WHAT WE DID. WE PAID OFF A HALF A BILLION DOLLARS IN DEBT IN 2015. WE HAVE PLANS TO PAY OFF AT LEAST THAT MUCH IN 2016. AND WE THINK WHEN THAT HAPPENS WE GET OUR DEBT TO EBITDA RATIO FROM FIVE TIMES TO SOMETHING LESS THAN THREE TIMES GETTING INTO 2017. WE THINK THAT WILL BE REALLY CRITICAL FOR OUR SHAREHOLDERS, PUT US IN A MUCH MORE BALANCED POSITION FROM A DEBT TO REVENUE STANDPOINT AND WE HAVE OPPORTUNITIES TO DO A LOT OF DIFFERENT THINGS WE CAN'T DO TODAY.

REAGAN: WE'RE CERTIANLY GOING TO BE WATCHING VERY CLOSELY JCPENNEY'S FUTURE. YOU'VE DONE A REALLY NICE JOB, A LOT OF QUESTIONS AHEAD. THANK YOU VERY MUCH FOR JOINING US TODAY.

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