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CNBC Exclusive: CNBC Transcript JCPenney CEO Marvin Ellison Speaks with CNBC’s Courtney Reagan on CNBC’s “Power Lunch” Today

WHEN: Today, Thursday, March 9th

WHERE: CNBC's "Power Lunch"

Following is the transcript of a CNBC EXCLUSIVE interview with JCPenney CEO Marvin Ellison and CNBC's Courtney Reagan on CNBC's "Power Lunch"(M-F, 1PM-3PM ET) today, Thursday, March 9th. Following are links to video of the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000599928 and http://video.cnbc.com/gallery/?video=3000599929.

All references must be sourced to CNBC.

COURTNEY REAGAN: THANK YOU VERY MUCH, MELISSA. I'M SITTING WITH JC PENNEY CEO MARVIN ELLISON IN THE HOME DEPARTMENT HERE IN ONE OF THE STORES IN QUEENS, NEW YORK, SITTING AMONG THE APPLIANCES. YOU ARE ALREADY SELLING THESE, BUT NOW YOU ARE GOING TO POTENTIALLY OFFER TO REMODEL MY BATHROOM. WHAT ARE YOU DOING? WHY IN THE WORLD ARE YOU DOING IT?

MARVIN ELLISON: WELL, IT'S GREAT TO BE HERE. IT'S ALL ABOUT UNDERSTANDING THE NEEDS OF THE CUSTOMER. ROUGHLY 70% OF THE CUSTOMER ARE FEMALE, AND OVER 70% OF THOSE CUSTOMERS OWN HOMES, AND SO WHAT THEY SAID TO US, WE'LL BUY APPLIANCES THEM FROM YOU, IF YOU SELL THEM. WE SET UP A 500 SHOWROOM, IT'S EXCEEDED EXPECTATIONS SO FAR, SO WE ARE PLEASED, BUT NOW THEY ARE SAYING, THERE'S OTHER THINGS WE'LL BUY IF YOU CAN PUT THOSE SERVICES IN YOUR HOME BECAUSE WE TRUST THE BRAND. WE'RE PUTTING IN SERVICES LIKE A FIVE-DAY BLIND INSTALL PROGRAM, WITH A SET PRICE PER WINDOW, PUTTING IN THINGS LIKE HVAC WITH A PARTNERSHIP WITH TRAIN, THE LARGEST PROVIDER IN THE COUNTRY. WE'RE LOOKING AT SMART HOME, A PARTNERSHIP WITH SAMSUNG, SPECIFICALLY ON SAFETY AND SECURITY, WHICH IS REALLY IMPORTANT TO OUR FEMALE CUSTOMERS, AND WE'RE LOOKING AT THINGS LIKE SIMPLE BATH REMODELS, NOT THE GUT AND PLUMBING, BUT JUST A SIMPLE ONE-TWO DAY REFRESH, WHICH IS A REALLY INTERESTING PROGRAM FOR THE MIDDLE MODERATE INCOME CONSUMER. THESE ARE THE KINDS OF THINGS THEY SAID THEY'LL PURCHASE FROM US IF WE PUT THE SERVICES IN PLACE, AND, BY THE WAY, WE HAVE A COMPETITOR THAT'S OVER 13 BILLION, AND THAT'S GIVING AWAY MARKET SHARE, AND WE BELIEVE IT'S A GREAT OPPORTUNITY FOR US TO TAKE ADVANTAGE OF THE MARKET SHARE.

REAGAN: YOU WON'T SAY IT, BUT I WILL THAT COMPETITOR IS SEARS, BUT THIS ALSO FEELS A LITTLE BIT MORE LIKE YOU ARE TRYING TO TAKE A HOME DEPOT CUSTOMER, YOUR OLD COLLEAGUES, THEIR CUSTOMERS, RATHER THAN A MACY'S SHOPPER. IS THIS YOUR RECOGNITION TRADITIONAL RETAIL CATEGORIES AND DEPARTMENT STORES LIKE CLOTHING ARE DEAD?

ELLISON: NO. IT'S A RECOGNITION THAT THE CUSTOMERS' DESIRES ARE PART OF OUR STRATEGY. SO, SPECIFICALLY, WE'RE TRYING TO DO A COUPLE THINGS, A, TRY TO FIND WAYS TO GROW, TWO, DE-EMPHASIZE DEPENDENCE ON APPAREL AND, ALSO, TO FIND WAYS TO SERVE OUR CUSTOMERS IN A DIFFERENT JADED WAY. OF COURSE, WE WANT TO DO SOMETHING UNIQUELY DIFFERENT FROM OUR COMPETITORS, AND, OF COURSE, WE WANT TO FIND BUSINESSES THAT ARE DIFFICULT TO REPLICATE AS A PURE PLAY E-COMMERCE COMPANY. IF WE CAN DO THOSE THINGS WHILE TAKING AVAILABLE MARKET SHARE, WE BELIEVE THOSE ARE ADVANTAGEOUS THINGS FOR US TO DO. BASED ON MY BACKGROUND AND UNDERSTANDING THIS SEGMENT OF BUSINESS VERY WELL, WE'RE NOT TRYING TO BE ANYTHING WE'RE NOT. WE ARE A PREDOMINANTLY FEMALE DRIVEN BUSINESS. WE HAVE A FEMALE DEMOGRAPHIC. OUR DEMOGRAPHIC HAS REALLY TWO REALLY DISTINCT AGE GROUPS. THE REALLY YOUNG AND MILLENNIAL FEMALE MULTICULTURAL CUSTOMER, AND THE MORE MATURE CUSTOMER THAT BOTH SERVE NEEDS THAT JCPENNEY WANNTS TO TRY TO PROCESS. IT'S A REALLY GOOD OPPORTUNITY TO SERVE THE CUSTOMERS IN A UNIQUE WAY.

REAGAN: ANALYSTS LOOK AT WHAT YOU AND THE MANAGEMENT TEAM ARE DOING HERE SAYING YOU'RE DOING A PRETTY GOOD JOB IN THE ENVIRONMENT YOU'RE WORKING WITH. YOU ARE DOING WHAT YOU CAN TO CONTROL FACTORS THAT YOU CAN. DEPARTMENT STORES IN GENERAL ARE STRUGGLING. MALL TRAFFIC IS DOWN. ARE YOU UP AGAINST AN INSURMOUNTABLE TASK, GROWING JCPENNEY IN AN ENVIRONMENT LIKE THIS?

ELLISON: WE DON'T THINK SO. IF YOU GO BACK TO JUST AS RECENTLY AS 2013, THIS COMPANY LOST $1.3 BILLION. WE HAD $5 BILLION IN DEBT WITH A NEGATIVE $600 MILLION IN EBITDA. IN 2016, WE MADE A NET PROFIT FOR THE FIRST TIME SINCE 2010. WE DELIVERED POSITIVE EARNINGS. WE HAVE OVER A BILLION DOLLARS IN EBITDA AND WE HAD FLAT SALES IN AN ENVIRONMENT WHERE MOST OF OUR COMPETITORS WERE NEGATIVE. WE THINK PART OF THAT IS BECAUSE OF OUR GREAT PARTNERSHIPS IN BEAUTY WITH COMPANIES AND BRANDS LIKE SEPHORA. WE THINK PART OF IT IS OUR FOCUS ON THE HOME WITH NEW PRODUCT LAUNCHES LIKE APPLIANCES. WE THINK PART OF IT IS THE GREAT PRIVATE BRANDS WE HAVE IN AREAS LIKE LIZ CLAIBORNE AND STAFFORD AND ST. JOHN'S BAY. SO WE THINK WE HAVE A VERY BALANCED STRATEGY OF PRIVATE BRANDS THAT DRIVE VALUE, BEAUTY THAT DRIVES EXPERIENCES OF TRAFFIC, AS WELL AS MAKING SURE WE'RE FOCUSED ON THE HOME AREA, WHICH A LARGE PERCENT OF THE CONSUMERS' DISPOSABLE INCOME IS GOING INTO. SO, $ 300 BILLION MARKET THAT WE BELIEVE WE HAVE THE OPPORTUNITY TO PICK UP SOME SIGNIFICANT MARKET SHARE.

REAGAN: BELIEVE MY COLLEAGUE MELISSA HAS A QUESTION. MELISSA, JUMP ON IN.

MELISSA LEE: THANKS, COURTNEY. MARVIN, YEAH, I DO HAVE A QUESTION. IT'S AN INTERESTING STRATEGY TO GO INTO THIS SORT OF SERVICES AREA. I'M JUST CURIOUS, IS THERE A POINT IN WHICH YOU WOULD SAY WE'RE GOING BEYOND OUR CORE COMPETENCY AT JCPENNEY. THAT THIS IS NOT WHAT WE'RE KNOWN FOR, AND THAT JUST BECAUSE OUR CORE FEMALE SHOPPER WANTS IT, IT DOESN'T MEAN WE HAVE TO ADD IT.

ELLISON: WELL, IT'S A REALLY GOOD QUESTION. I SPENT 12 YEARS OF MY LIFE RUNNING A BUSINESS THAT LOOKS A LOT LIKE THE SERVICES SPACE THAT WE'RE GOING INTO. AND IF YOU GO BACK ON THE TIMELINE, JCPENNEY ACTUALLY SERVED A LOT OF THESE PRODUCTS AND SERVICES AT ONE TIME IN OUR HISTORY. A LOT OF PEOPLE SAID THE EXACT SAME THING ABOUT THE APPLIANCE BUSINESS. BUT WE WERE ABLE TO ROLL OUT 500 SHOWROOMS, AND IT WAS ONE OF OUR STRONGEST CATEGOIES FOR 2016. SO WE THINK THERE'S POWER IN LISTENING TO THE CUSTOMERS, BUT WE ALSO UNDERSTAND WHAT WE CAN AND CANNOT DO. AND WE HAVE THE SYSTEMS INFRASTRUCTURE WITH THE TALENT WE BROUGHT ON BOARD AND THE PRODUCT AND SERVICE KNOWLEDGE WE THINK WE CAN DO THIS EXCEPTIONALLY WELL.

TYLER MATHISEN: YOU KNOW, MR. ELLISON –

REAGAN: TYLER, GO AHEAD.

MATHISEN: IF I MIGHT. I CAN SEE HOW THE APPLIANCES GIVE YOU A WHOLE NEW REVENUE STREAM. IT IS A GROWING AREA AS YOU POINT OUT. BUT I WONDER WHAT YOU THINK JCPENNEY CAN DO DIFFERENTLY IN THAT PRODUCT CATEGORY THAN SOME OF THE COMPETITORS, WHETHER IT'S HOME DEPOT, LOWE'S, SEARS, BEST BUY, AND OTHERS BECAUSE A REFRIGERATOR IS A REFRIGERATOR, AFTER ALL.

ELLISON: THAT'S A VERY GOOD POINT, BUT INNOVATION IS REALLY IMPORTANT. WE HAVE BRANDS LIKE SAMSUNG AND LG WHICH REALLY LEAD THE WAY IN INNOVATION. IN ADDITION, LET ME GIVE YOU A DATA POINT. OVER 100,000 APPLIANCES BREAK EVERY DAY IN THE UNITED STATES. 100,000. SO THERE'S ALWAYS A NATURAL DEMAND. WE MAY NEVER BE NUMBER ONE IN MARKET SHARE, BUT WE THINK IT IS A CATEGORY THAT COULD BE SIGNIFICANT FOR US AND IT SERVES THE NEED OF A CUSTOMER. IF YOU OWN A HOUSE, YOU OWN AN APPLIANCE. AND IF YOU OWN A HOME AND YOU SHOP AT JCPENNEY, WHY NOT GIVE YOU THE ABILITY TO BUY AN APPLIANCE IN A PLACE WHERE YOU SHOP ON A MORE CONVENIENT BASIS? AND THE NUMBERS REFLECT THAT THE STRATEGY'S WORKING.

REAGAN: MARVIN, I JUST HAVE TO WRAP IT UP HERE, BUT I WANT TO ASK ABOUT YOUR BUSINESS SO FAR IN MARCH. HAVE YOU SEEN THE TREND TURN AROUND FROM FEBRUARY?

ELLISON: IF I COULD CLASSIFY THE BIGGEST ISSUE WE HAD IN 2016 IN TWO WORDS, IT WOULD BE WOMEN'S APPAREL. SO WE LAUNCHED A NEW SPRING GOODS, AND I MENTIONED THIS ON OUR MOST RECENT EARNINGS CALL, AND WE'RE SEEING A REALLY NICE RESPONSE FROM THE CUSTOMER. SO WE FEEL GREAT ABOUT OUR APPAREL BUSINESS. IF WE CAN GET OUR APPAREL BUSINESS BACK ON TRACK AND COMBINE THAT WITH THE INITIATIVE OF BEAUTY WITH SEPHORA, HOME WITH APPLIANCES AND SOME OF THESE NEW SERVICE OFFERINGS, WE THINK WE CAN HAVE A REALLY GOOD 2017.

REAGAN: SO THINGS MIGHT BE CHANGING FOR WOMEN'S APPAREL?

ELLISON: WE HOPE SO.

REAGAN: OKAY.

ELLISON: TRENDS ARE GOOD.

REAGAN: GREAT, THANK YOU SO MUCH, MARVIN ELLISON, CEO OF JCPENNEY. THANK YOU.

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