JC Penney revamps women's clothing brand, focusing on denim in bid to boost sales

Key Points
  • The relaunch of its Ana brand is part of J.C. Penney's strategy to pull itself out of a sales slump and remain relevant in the age of Amazon.
  • Women's apparel is Penney's largest category.
  • Penney isn't the only department store operator expanding private brands.
Source: JC Penney

J.C. Penney is revamping one of its biggest in-house women's apparel brands to focus more on denim and casual looks.

The relaunch, announced Thursday, is part of Penney's strategy to pull itself out of a sales slump and remain relevant as more and more people turn to Amazon for clothing.

Starting Thursday, its Ana brand will have new products in stores and online — in extended sizes from missy to plus to tall. The full assortment will be online and in stores by March, with items priced at about $39 to $49 each. Changes include jeans with softer fabrics and accessories in pastel hues.

"We have been spending a lot of time with customers," said Michelle Wlazlo, executive vice president and chief merchant. "One thing that came out loud and clear was ... they didn't look at us as a place to buy casual."

Wlazlo, who reports directly to CEO Jill Soltau, joined Penney last March. Previously, she was senior vice president of apparel and accessories merchandising at Target and spent nearly two decades at Gap.

Women's apparel is especially important to Penney's overall business. The category made up 22% of net sales in 2018 — $11.66 billion. Women's apparel is also Penney's largest category, followed by men's apparel and accessories, at 21% of sales.

Penney's revenue has been shrinking. Net sales were down 7.1% in fiscal 2018, while same-store sales dropped 3.1%. Penney is calling for sales to be down 7% to 8% in fiscal 2019. It hasn't reported a quarterly sales gain since the 2017 holidays.

Penney is set to report earnings for its fourth quarter, which includes the latest holiday season, on Feb. 27.

Another concern on Wall Street: Penney has more debt than some of its peers, such as Macy's. But it won't face a major repayment date until 2023, giving the retailer some time. The company has said it has "very manageable near-term debt maturities."

The relaunch of the Ana brand is the start of more to come at Penney, according to Wlazlo.

"While there are a lot of competitors out there, we need to stay focused on what we are doing here," she said. "We probably lacked some confidence for a little while. But we are not being shy [now] about the design details that we need."

Penney announced late last year that it had opened a new kind of store in Hurst, Texas, which the company refers to as a "brand-defining" space. Some unique additions to the first-of-its-kind location include a barber shop, a kids play area, a cafe, a "selfie studio," and styling rooms for men and women. There also are fitness studios and styling classes.

It is still unclear if any of these ideas will roll out to Penney's other stores or if they will make a meaningful difference to its business. But the space offers a glimpse at what the retailer is testing to win back shoppers.

Macy's is also experimenting with ways to win younger shoppers, and part of its efforts is focused on cultivating stronger, in-house fashion labels. The company said Wednesday it plans to take its four "best" private brands and turn them each into a $1 billion business.

Discounter Target has been successful with this strategy, having launched dozens of its own labels — including Cat & Jack for children's clothing and A New Day for women's. They both achieved $1 billion in sales within their first year. Target launched its own denim-focused brand called Universal Thread in 2018.

There's a reason everyone from Penney to Macy's to Target is trying to grow in denim. Jeans are still in demand, and some would say making a comeback in fashion. A whopping 364 million pairs of women's jeans were purchased in the U.S. in the 12 months ended in February 2019, according to a tracking by NPD Group, up nearly 22 million units from the prior year.

Penney shares, meantime, are once again trading under $1, putting the retailer at risk of being delisted from the New York Stock Exchange. This marks the second time since August that Penney has been in this situation. On Jan. 31, Penney said it had received a notice from the NYSE, warning that its stock was no longer in compliance. It said it had six months to regain compliance.

Penney has a market value of about $227.5 million. Its stock has tumbled more than 45% over the last 12 months.

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